Bitcoin (BTC +1.27%) investors were taken on quite a ride in 2024. The cryptocurrency more than doubled in under a year, smashing past previous all-time highs to finally surpass $100,000, a milestone few could dream of just a decade before. The historic rise was driven in large part by a major shift in investor sentiment: More and more, Bitcoin is seen as a legitimate part of a well-balanced portfolio.
CRYPTO: BTC
Key Data Points
So, with the crypto now having retreated not just below the six-figure mark, but below $90,000, is now the time to invest?
Institutions pile in
Last year began with a crucial development in Bitcoin's ascendance: the approval of spot Bitcoin exchange-traded funds (ETFs). In January, the Securities and Exchange Commission (SEC) gave the green light to asset managers like Blackrock to issue ETFs that track the movement of Bitcoin's price, the shares of which can be bought and sold through traditional brokers in the same way you might trade shares of Apple.
The ETFs bring enhanced liquidity and remove logistical and security challenges associated with holding Bitcoin directly, all qualities that institutional investors like to see before investing in an asset -- and invest they did. Upon approval, money flooded in and continued all year. As of the fourth quarter of 2024, institutional investors have just under $27 billion invested, representing 25.4% of the total assets under management (AUM) of all spot Bitcoin ETFs.
This marks a radical shift from years past; it wasn't long ago that most fund managers wouldn't go near Bitcoin. Indeed, many derided the cryptocurrency as a fad at best or a fraud at worst.
Blackrock is the perfect example
There's probably no better illustration of this change of heart than Blackrock itself -- or rather, its legendary CEO, Larry Fink. During the bull run of 2017, Fink declared that Bitcoin held little value other than to facilitate crime, saying "Bitcoin just shows you how much demand for money laundering there is in the world."
Fast forward to today and it's clear Fink has changed his tune. Not only does he oversee the largest spot Bitcoin ETF in the market, Fink recently told attendees of the World Economic Forum that Bitcoin is a "secure international currency" capable of reaching $700,000.
Allocation matters
Fink's prediction of $700,000 rests on the same logic that leads Ark Investment Management CEO Cathie Wood to similar conclusions: An average of a 2% or so allocation to Bitcoin from fund managers across the globe would be sufficient for it to reach these heights. Given the accelerating shift in institutional attitudes, this doesn't appear to be out of the question by any means. Still, there's certainly no guarantee. Bitcoin continues to be seen as too risky by many more conservative investors.
Political sea change
While much of this shift in sentiment preceded the election of President Donald Trump, the new administration represents a monumental change in how Bitcoin will be treated by regulators and the government at large. Where the Biden administration was suspicious of the industry and often took a hawkish approach to regulating it, the Trump administration appears to be taking the opposite tack, promising to make America the "crypto capital of the planet."
One of the most substantial moves early on is to replace former SEC chair Gary Gensler with the decidedly pro-crypto Paul Atkins. Atkins still needs to be confirmed and has yet to take the reins, but his probable tenure will likely be marked by a hands-off approach to the crypto market.
Is now the time?
With its growing legitimacy in the eyes of more and more institutional investors and a more favorable regulatory environment ahead, now may seem like the perfect time to invest. I think it's a bit more complicated. The truth is, the overall economic picture is shaky at the moment and although Bitcoin is more ingrained in the financial mainstream than ever before, it is still seen as a "risk-on" asset, meaning it will have an outsize response to a market downturn. We're already seeing this play out somewhat in the face of current uncertainty.
That being said, it's important to invest for the long term, and attempting to time the market is rarely a successful endeavor. Even if there is more downside in the short term, I think buying Bitcoin under $90,000 will look like a bargain five years from now. However, if you are nearing retirement or otherwise have a low risk tolerance, there are safer places to allocate funds.
