Do this before Bitcoin skyrockets

Are you ready for a crypto comeback? Consider buying the granddaddy of cryptocurrencies, Bitcoin (BTC -0.92%), if you are generally bullish on blockchain-based tokens. After all, crypto is already volatile enough, so investors can reduce their volatility exposure somewhat by sticking with a token that is expensive and therefore usually slower than low-cost cryptos like Ripple and Cardano.

On the other hand, a five-figure token like Bitcoin isn’t capable of skyrocketing — or is it? So don’t think of Bitcoin as a dinosaur among digital assets. Under the right conditions, it can provide a perfect combination of stability and explosiveness.

No need to fear the Fed

Every time Bitcoin has crashed since its inception in 2009, critics have predicted its demise. However, they have consistently been proven wrong after the token has fully recovered. It will take some time for Bitcoin to regain its footing this time, but a full recovery to the previous peak around $69,000 would represent a 3x move.

Whether that’s “skyrocketing” or not may depend on your definition of the term, but a 3x move is certainly respectable. Crypto critics are happy to say, “This time it’s different,” but Bitcoin’s perfect track record of fully recovering after at least half a dozen crashes puts the burden of proof squarely on the bears until proven otherwise.

Also, investors should consider why Bitcoin crashed this time. Concerns about intensified crypto regulation and the legitimacy issue are certainly pieces of the puzzle. But a primary contributing factor to Bitcoin’s dive that began in late 2021 was arguably the market’s fear of higher interest rates.

That fear puts negative pressure on risk assets such as previously high-flying technology stocks. One could argue that the Federal Reserve is closer to the end than the beginning of the hiking cycle, but there is no reason to go that route. Consider instead whether Bitcoin really competes with Treasuries the way large stocks do.

Although this may change one day, currently 401(k) plans and other large-scale mutual funds are comprised primarily of stocks (and/or mutual funds and exchange-traded funds that contain stocks) and bonds. You won’t see bonds competing with Bitcoin for allocation space in these funds. If anything gets temporarily displaced in the mix as bond yields rise, it’s likely to be stocks. Firmly dedicated Bitcoin believers, meanwhile, are known to hold on to their tokens through thick and thin. For them, a Bitcoin vs. Bonds debate never arises.

A Bitcoin ETF is a question of “when”, not “if”

Meanwhile, for better or for worse, Bitcoin’s battle for legitimacy and regulatory acceptance is currently being waged in the courts. In particular, Grayscale has taken the Securities and Exchange Commission (SEC) to court, claiming that the regulator unfairly rejected its application to convert its Grayscale Bitcoin Trust (which currently trades under the ticker GBTC) into a full-fledged spot Bitcoin ETF.

Grayscale claims that there are already approved Bitcoin futures ETFs out there. In this light, it can be argued that the SEC is not consistent or impartial. Grayscale is reportedly willing to take this fight to the Supreme Court if necessary, but even if Grayscale doesn’t win this time, it’s likely that someone somewhere will eventually.

At this point, Bitcoin is too big and influential to ignore; the market value has already exceeded the market value Visa and MasterCard. Regulators must be quick to scrutinize and slow to adopt new technologies, especially when they disrupt the status quo.

Granted, there is no guarantee that a legitimate Bitcoin ETF will appear in the near future, but if and when it finally does, the floodgates will open, providing convenient, accessible access to the world of cryptocurrency for the masses. Making Bitcoin-based investment vehicles available through popular stockbrokers, 401(k) plans and investment advisors should be a game-changer. This prospect, along with Bitcoin’s past penchant for vertical recoveries when they finally occur, suggests a possibility—perhaps even a likelihood—of a rocket ride sooner or later.

So feel free to take a moderately sized position in Bitcoin before the shuttle leaves the launch pad.