Bitcoin (BTC 2.43%) continues to prove that it's one of the best financial assets to own. Its price has skyrocketed 145% in 2024 (as of the Dec. 18). And in the past five years, it has climbed a whopping 1,300%.
As of this writing, the world's oldest and most valuable cryptocurrency trades at about $103,000, with its market cap now above the $2 trillion mark. If you think you've missed the boat, think again. It's not too late.
Here's the ultimate guide to investing in Bitcoin for maximum returns.
Don't time the market
Any investor, whether the focus is on stocks or cryptocurrencies, certainly understands the concept of buying low and selling high. This strategy of boosting portfolio returns makes sense.
However, it's almost impossible to repeat this process with any level of consistent accuracy. In other words, trying to time the market in an effort to avoid the down days and instead only capture the best days is a waste of time and energy. Excessive trading like this can cause more harm than good to your portfolio. Not only that, but taxes and transaction costs will eat away at any gains.
Bitcoin has had many declines of more than 50%. Just imagine if you were able to buy at the lows in March 2020 or in November 2022, for example. The returns since those two points in time have been unbelievable.
The top crypto has ripped higher this year. The natural thinking among investors who have been on the sidelines is that Bitcoin is due for a correction in the near future. I can understand that perspective, especially given the digital asset's previous price cycles.
While you continue to wait on the sidelines, though, there's a very real possibility that Bitcoin's price continues marching higher. Holding cash when this happens results in a huge opportunity cost.
CRYPTO: BTC
Key Data Points
Keep it simple
Instead of timing the market, investors should instead prioritize time in the market. This shift in perspective reveals that having a long-term mindset is really the best approach when it comes to Bitcoin.
But before you invest in the crypto, it's critical to understand what makes it special. The fact that there will only ever be 21 million coins highlights its scarcity. In a world in which governments constantly debase fiat currencies by running the printing presses, owning something that has a fixed supply is alluring.
Bitcoin is also decentralized and global. And compared to gold, which is viewed as a popular store of value, Bitcoin is more divisible, easier to use in transactions, portable, and verifiable. I don't think it's a stretch to believe that Bitcoin's market cap will not only reach the $17.8 trillion value of all above-ground gold, but that it can also exceed this figure in the future.
After you've established that you're bullish on Bitcoin for the next five to 10 years, adopting a dollar-cost averaging strategy is ideal, in my opinion. This eliminates the guesswork needed to correctly time the market. Moreover, it ensures that investors take advantage of multiple price points when using cash to add Bitcoin to their portfolios. This approach turns the digital asset's volatility into an advantage you can exploit.
Once you've learned more about Bitcoin, built up conviction that it still has major upside, and decided that you want to own it in your portfolio, the next step is to start making small purchases on a recurring basis. It's also important that you keep up with developments happening that relate to Bitcoin. Over time, this strategy should lead to a satisfactory result.
