Bitcoin (CRYPTO:BTC) has come a long way since the height of crypto winter 2022. Over the past two years, it has risen over 300% and recently reached a new all-time high.

However, since it peaked in April, things have cooled off and – dare I say it – become lackluster. Volatility has returned and any momentum Bitcoin tries to muster appears to be short-lived. However, although the current situation may seem a little bleak at the moment, I see Bitcoin below $70,000 as an opportunity that will not last long.

Here’s why.

Image source: Getty Images.

Why Now Might Be a Good Time to Buy

In the short term, there are two events that are likely to be significant factors that will eventually drive the price of Bitcoin well beyond $70,000.

The first is Bitcoin reduce by half. Occurring approximately every four years, halving reduces the rate of production of new Bitcoins, thus increasing scarcity. In other words, halvings change the dynamics around Bitcoin supply and demand.

By reducing the supply rate at which Bitcoins are produced, halving essentially means that even if demand remains constant, the price has to increase to compensate for the reduction in supply. After all, mining operators still need to pay their electricity bills. On average, in the year that a halving occurs, the price of Bitcoin increases by around 125%. If a similar situation happens this time, Bitcoin could reach almost $100,000 by the end of the year.

The other near-term development that should give Bitcoin a boost is the approval of spot Bitcoin exchange-traded funds (ETFs). With these ETFs, investors can gain exposure to Bitcoin through exchanges and no longer need to navigate what can be complex cryptocurrency exchanges, effectively democratizing access to Bitcoin for retail and institutional investors.

Demand for these Bitcoin ETFs has been extraordinary, with initial purchases occurring at 10 times the daily rate of Bitcoin production. Although the frenzy has cooled somewhat, these ETFs remain among the most successful launches in history, racking up $15 billion in capital inflows in just six months. To provide some context, Bitcoin ETFs achieved the same inflow volume in seven weeks that gold ETFs took three years to achieve.

Long-term perspectives

While there are short-term developments that are encouraging and should make the drop below $70,000 only temporary, it is in the longer term that Bitcoin’s appeal becomes more apparent. First and foremost is its robust monetary policy that prioritizes not only value preservation but also appreciation, thanks to halvings and its finite supply of 21 million coins. As fiat currencies around the world continue to inflate and governments take on greater debt, Bitcoin will solidify itself as the ultimate safe-haven asset.

The story continues

Furthermore, the decentralized nature of Bitcoin ensures that no single entity controls the network, making it censorship-resistant. This quality will prove increasingly valuable in a world where financial systems are subject to regulatory pressures and geopolitical tensions.

Last but not least is the general trend of younger generations reaching investment age. These younger generations are known to be more comfortable with digital assets, and as the leading cryptocurrency, Bitcoin should naturally benefit.

Price appreciation potential

In the long term, it is easy to envision a scenario in which Bitcoin does not maintain its historical pace of price appreciation. This change is likely many years away, however. As sensational as it may seem, a $1 million price for Bitcoin is within the realm of possibility. Various models and theories such as the Law of Power and Metcalfe’s Law support this potential.

If Bitcoin reaches $1 million or even half that, then a purchase below $70,000 will become even more attractive. But rest assured, while only time will tell how high Bitcoin rises, it is likely that investors will eventually look at today’s prices similarly to how they view the days when Bitcoin traded for less than $10,000 – with a feeling of missed opportunity.

Should you invest $1,000 in Bitcoin right now?

Before buying Bitcoin shares, consider the following:

The Motley Fool Stock Advisor analyst team just identified what they believe is the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia I made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $802,591!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular analyst updates, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of the S&P 500 since 2002*.

See the 10 actions »

*Stock Advisor returns June 10, 2024

RJ Fulton has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The motley fool has a disclosure policy.

Should you buy Bitcoin while it costs less than $70,000? was originally published by The Motley Fool

Fuente