Last year was a wonderful time to be a Bitcoin (BTC +1.70%) investor, as the digital asset's price more than doubled in 2024. This was consistent with its long-term behavior -- a journey that has featured extreme volatility along a generally upward path.
On the last day of 2024, the world's top cryptocurrency traded at about $92,000, 15% below its all-time high. Should you buy Bitcoin while it's under $100,000?
Bitcoin takes a breather
Bitcoin benefited from a post-election surge as the investment community became extremely optimistic about the potential of the incoming administration to take a friendlier regulatory stance toward the crypto. However, Bitcoin is taking a bit of a breather at the moment. So some could view this as an opportunity to buy the dip.
That's because price declines aren't anything new for Bitcoin. In fact, they're par for the course. Long-time hodlers -- crypto lingo for holders -- know that being able to handle volatile ups and downs is a prerequisite.
During Bitcoin's 16 years of existence, its price has fallen by more than 50% on half a dozen different occasions, and by more than a third on many others. Every time those sharp selloffs happened, Bitcoin was declared dead by various media outlets, pundits, and so-called experts who pointed to its growing use in illicit activities, or asserted that it had zero utility or value, among other things.
Those bearish perspectives have always proven wrong, as Bitcoin's price kept recovering and marching higher. If history is any indication, then the top cryptocurrency will continue to trend toward higher highs and higher lows.
CRYPTO: BTC
Key Data Points
Digital scarcity
Bitcoin bulls often compare it to gold, a store of value for a very long time. On the surface, this makes some sense.
Gold is a scarce element, and while more is steadily being mined, the Earth only has a fixed amount of it. And while it has some industrial applications, gold's main uses are to make jewelry or to serve as an investment vehicle. In essence, it has a high value because people have decided that it's valuable, not necessarily because it's useful in any meaningful way.
You can argue that Bitcoin is viewed similarly: Its value is derived from the simple fact that people have decided to view it as valuable. But Bitcoin is scarcer than gold, because the amount of new supply coming into the market cannot be changed in response to rising demand. And the total mineable supply of Bitcoin is fixed at 21 million coins -- of which more than 19.8 million have already been mined.
Gold, on the other hand, becomes more economical to mine in hard-to-reach areas when it surges in price. This allows the supply of new gold to grow if economic circumstances warrant it. There's even talk of eventually mining for gold in outer space, where there are believed to be some asteroids with massive deposits.
In addition to its scarcity, Bitcoin is easier to transport, easier to use in transactions, and much more divisible than gold. And in a world where economic activity is only going to become more digital, it's not crazy to think that Bitcoin will have a place as a store of value for many people around the world.
Huge upside
Because Bitcoin generates no revenue, earnings, or cash flow, it's impossible to use traditional stock valuation metrics to put a price target on it. However, comparing it to gold can once again aid us in our analysis of the asset.
The current value of all gold above ground is about $17.7 trillion, based on recent market prices. Bitcoin has superior properties when compared to the precious metal, so perhaps it's conservative to think that the crypto could rise more than ninefold to at least match gold's market cap one day. In this scenario, Bitcoin's ultimate price tag, based on the current supply of tokens, would be about $900,000.
This makes buying this digital asset while it's less than $100,000 look like a smart choice.
