Bitcoin has had quite an unpredictable journey since the recent elections. You might wonder if it’s time to jump in or if it’s best to step back.
After the election, Bitcoin surged past $100,000. Many were optimistic, thinking it might even reach a million with Donald Trump in office, who many crypto supporters had hoped would ease regulations. However, right after his inauguration, the price took a nosedive, dropping over 20%.
Supporters suggest that you should “buy the dip” when prices drop. But before you do, ask yourself: What’s your reason for wanting to own cryptocurrency?
Some believe the gains seen after the election are just the beginning. Backers in the crypto world expect fewer regulations and supportive laws with Trump in charge. There’s even talk of a proposed U.S. federal cryptocurrency stockpile. Will these expectations become reality? Only time will tell.
But it isn’t just the U.S. that’s excited about crypto. Cities like New York, London, and Hong Kong are all racing to become the leading centers for cryptocurrency innovation.
So, why consider owning cryptocurrency? For many, it serves as a way to diversify investments. With new exchange-traded funds (ETFs), buying cryptocurrency has become easier. Others see it as a way to protect against inflation since Bitcoin’s supply is limited to 21 million. As Bitcoin is lost or forgotten, its scarcity increases.
Since 2010, Bitcoin’s value has gone up significantly, with an average annual increase of about 160%, according to data from Coinbase. In 2024 alone, it rose over 121%. But it’s not all sunshine; Bitcoin’s value can swing wildly, with annual gains ranging from 1,402% to drops as steep as 74%.
Bitcoin first crossed the $100 mark in April 2013. It quickly jumped to around $230, only to crash to $66 later that year. Such volatility is common—crashes similar to the Great Depression occurred in 2018 and again in 2022 and 2023.
These dramatic price changes happen despite a lack of traditional economic backing. Unlike stocks, Bitcoin doesn’t represent a company’s earnings or physical goods. Many new cryptocurrencies offer little more than speculative trading fodder.
Moreover, the cryptocurrency space has a reputation for illicit activities. The November 2023 fraud case against former crypto mogul Sam Bankman-Fried has not helped the industry’s image. Just last month, North Korea executed the largest hack in crypto history, further raising concerns about security and trust.
Currently, Bitcoin may not effectively serve as an inflation hedge. For example, in June 2022, inflation hit a 9.1% high while Bitcoin dropped by nearly 64%, failing to demonstrate any protective value during that spike.
While Bitcoin may be capped, there are currently over 10,000 other cryptocurrencies vying for attention. This further clouds the market with uncertainty. Each new coin competes for survival, yet many lead to confusion and doubt among investors.
Market fluctuations in crypto are largely driven by public sentiment. Investors often rush in during price spikes, driven by the fear of missing out. Conversely, they may panic and sell when prices drop, locking in losses. This pattern—buying high and selling low—is common and often leads to regret.
Can you withstand the wild ups and downs of cryptocurrency? If you’ve been rattled by a stock drop, consider how you’d handle a potential 80% decline.
Investing in cryptocurrency is like riding a roller coaster. It’s exhilarating but can be frightening. Can you handle the ride?
Ken Fisher is the founder and executive chairman of Fisher Investments and a respected financial author, with insights featured in numerous global publications.
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