Should You Buy Bitcoin While It’s Still Under $25,000?

For the first two months of 2023, Bitcoin (BTC -4.55%) has been on a remarkable run. It is now up 41.45% for the year, trading at just over $23,479. But there are signs that Bitcoin is running out of momentum as it tests the $25,000 mark.

While Bitcoin briefly touched the $25,000 level in mid-February, it quickly gave up those gains. And the last time Bitcoin flirted with the $25,000 level back in August 2022, it finally dipped below the $18,000 mark. As a result, the consensus now is that $25,000 is a very important price level for Bitcoin. So can Bitcoin break through the $25,000 level or not?

Short-term outlook

Of course, if you only take a short-term view, things look particularly difficult for Bitcoin. Everyone is watching the Federal Reserve right now for signs of further monetary tightening. If the Federal Reserve continues to raise interest rates to tame inflation, the thinking goes, then Bitcoin is going to have a tough time breaking through the $25,000 level. At some point, the Fed could trigger a recession, and that’s not going to help Bitcoin at all.

Image source: Getty Images.

Moreover, the price of Bitcoin is now increasingly correlated with the performance of major technology stocks. Over the past 90 days, the correlation between Bitcoin and the tech-heavy Nasdaq is 0.75. This suggests that while crypto is not marching in lockstep with major tech companies, it is marching at roughly the same pace. If you’ve been following all the layoffs that have been happening in Silicon Valley recently, this is not good news for crypto. It suggests that a real recovery in Bitcoin will not happen until the tech industry fully recovers.

Long-term outlook

But if you take a long-term perspective, the outlook for Bitcoin brightens considerably. The case for Bitcoin global adoption is hard to deny. Just about every head-spinning price estimate made for Bitcoin—for example, Bitcoin at $500,000 or Bitcoin at $1 million—is based on some scenario where Bitcoin becomes relatively ubiquitous on a worldwide level.

When Cathie Wood and Ark Invest came up with a revised $1.48 million price target for Bitcoin this year, it was based on the assumption that Bitcoin would see tremendous growth in eight key areas. For example, in emerging markets, Bitcoin will eventually represent a larger and larger proportion of the M2 money supply, a common measure of the money supply. Among institutional investors, Bitcoin will account for a larger and larger share of the total portfolio holdings. At the same time, Bitcoin will increasingly be held on corporate balance sheets, used for cross-border money transfers, and held as a form of “digital gold”.

But that’s only part of the global adoption story for Bitcoin. As Silicon Valley venture capitalist Tim Draper pointed out in his $250,000 price prediction, Bitcoin will become more and more ubiquitous as a form of payment. Just about everything you buy online will be paid for via Bitcoin, Draper predicts. While this scenario may take quite some time to play out, the fact is that more than half of American adults now own crypto or have owned it in the past.

And finally, new use cases for Bitcoin continue to emerge. With each new use case, the valuation of Bitcoin will only continue to increase. The one use case that has everyone buzzing now is the ability to store non-fungible tokens (NFTs) on the Bitcoin blockchain. These NFTs, known as Ordinals, could just be a passing fad — or they could be part of a new era for Bitcoin, where the blockchain will eventually be used for much more than just processing financial transactions.

Should You Buy Bitcoin?

Ultimately, the choice to buy Bitcoin comes down to how you view the market. If you only take a short-term view of the market, Bitcoin may not look like an attractive buy right now. Why take on all the risk, volatility and uncertainty of crypto when you can just buy a great tech stock in it Nasdaq?

But if you take a long-term view of the market, Bitcoin below $25,000 looks like a screaming buy. The future growth prospects of Bitcoin look just too good to ignore. Although the price of Bitcoin may never reach the $1 million mark, it is hard to see how Bitcoin will not once again run at the all-time high of $68,789.63. At today’s prices, that would represent a nearly 200% return on your investment.