Bitcoin (BTC 2.33%) no longer flies under the radar. It's a major financial asset that gets a lot of attention these days. With an impressive trailing five-year return of 879% (as of Aug. 21), every long-term investor is probably thinking about owning it.
After hitting a peak of $124,457 on Aug. 13, the world's oldest and most valuable cryptocurrency is taking a bit of a breather, trading down 9% from that record. This dip might present investors with a valuable opportunity to supercharge their portfolios.
Should you buy Bitcoin while it's currently well under $120,000?
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It's still early for Bitcoin
Bitcoin has been around for more than 16 years, since the first block was created in January 2009. After the digital asset's monster rise during that time, you might be wondering if it's too late to buy Bitcoin. That's a valid concern for someone thinking about return potential going forward. However, there are signs it's still very early.
Bank of America recently released findings from a survey about global fund managers. It was revealed that 75% of respondents have no allocation to crypto. That's extremely surprising, especially when you consider Bitcoin's previously mentioned price performance in the past five years.
To be fair, there could still be major restrictions on what these fund managers are allowed to buy in their portfolios. Nonetheless, that data point shows there is substantial institutional adoption that needs to happen. The popular Bitcoin spot ETFs help, as they make things easier and more convenient.
Zooming out and looking at the overall economy paints a similar picture. Bitcoin currently sports a market cap of $2.2 trillion. Compared to all the wealth in the world, whether it's stored in equities, bonds, real estate, or collectibles, for instance, Bitcoin has a tiny penetration rate. Assuming Bitcoin competes with the entire financial system, you quickly realize that it still has significant upside.
Billionaire Michael Saylor, perhaps the strongest Bitcoin bull, has a simple thesis. He believes that over the next two decades, more of the world's capital and wealth will be represented by Bitcoin, pushing up its price.
Governments still need to get involved, too, in a more pronounced way. The U.S. owns gold that's valued at close to $1 trillion at today's prices. If Bitcoin becomes an important reserve asset on a global stage, it will introduce tremendous buying power that can push its price to unbelievable heights over the long term.
CRYPTO: BTC
Key Data Points
Having the right mindset is key
Bitcoin's historical price chart is impressive. However, there are bouts of extreme volatility, which can be difficult for some investors to handle. This has happened this year, even though some could argue that Bitcoin is growing up and becoming a more mature asset. At the end of the day, Bitcoin trades similarly to a growth tech stock. That could change in the future as more people and institutions own it and its price goes up.
Investors should view any dips as buying opportunities. But that doesn't mean you should be in it to take a quick profit any time the price jumps. In the past, Bitcoin has rewarded patient investors. Those who have been able to hodl through the ups and downs have reaped the rewards.
I believe every investor who has a time horizon of at least five years should consider adding a small amount of Bitcoin to their portfolios. The returns going forward probably won't resemble the past. But thoughtful long-term investors, those who have done their homework, will understand the allure of owning something like Bitcoin that has a fixed supply cap. As always, keep your allocation appropriate for your risk tolerance.
As Bitcoin trades well below $120,000 per unit, investors shouldn't hesitate to buy the top cryptocurrency.
