Bitcoin had a strong start in 2024, reaching an all-time high in January following interest rate cuts and the federal government’s embrace of the crypto industry. But all of those gains have been decimated over the past few weeks. And while that’s tough news for many digital asset holders, the decline has prompted some investors to wonder: is now a good time to buy the dip?
Despite the industry’s seemingly favorable prospects under President Donald Trump, Bitcoin has dumped nearly 30% of its value since he took office, falling to a low of $78,000 earlier this month. Even as Trump follows through on a number of crypto-related promises—including establishing a national Ethereum exchange-traded funds, tells Fortune. “But I think that’s created this opportunity for investors.”
To invest or not to invest?
The fact that Bitcoin has dipped does not mean that everyone should start buying crypto. In fact, digital assets have many detractors, who point to its recent arrival on the financial scene, volatility, and history of scams.
“My position is that cryptocurrencies are impossible to value,” Artie Green, a certified financial planner from California, told Fortune. “We can determine the value of stocks, bonds, BDCs, etc. but cryptocurrencies are purely speculative.”
He advises anyone interested in crypto investing to take stock of their finances first, make sure they have a buffer for unexpected expenses, and only invest excess funds. “The only way I would recommend buying Bitcoin is if you first create a comprehensive financial plan that determines how much money you will need to pay for all your living expenses & goals for the rest of your life,” he said.
For people who do want to invest, there are several factors to consider before actually making a purchase, including technical sophistication and risk appetite. Those who don’t want to be involved in active trading should consider an exchange-traded fund (ETF)—a financial product sold on the traditional stock market which tracks the asset’s price. Major institutions like BlackRock and Fidelity offer Bitcoin ETFs to investors, but there are also crypto-specific ETF issuers like Grayscale and Bitwise.
“There are lots of ways to invest in Bitcoin and crypto, and there are no necessarily wrong answers,” says Zach Pandl, managing director of research at crypto asset manager Grayscale. “Investors should first consider their own circumstances before making that decision.”
For people who want to actively trade their crypto, owning Bitcoin directly through a crypto exchange gives investors more flexibility and control over their holdings. Crypto exchanges like Kraken and Coinbase allow investors to buy, sell, trade and store their crypto, but the exchange maintains control of investors’ assets for them. The downside is that investors are more vulnerable if an exchange mismanages its funds like FTX, or is hacked like ByBit.
Self-custody wallets like Metamask or Coinbase Wallet allow investors to actively use their crypto in trading and maintain control of their assets. However, this requires an understanding of blockchain technology. And there is the added problem of remembering logins: there is no “forgot my password” option to retrieve the funds.
How much should you invest in Bitcoin?
People who do want to buy Bitcoin should think carefully about how much they want to invest.
Crypto analysts and financial advisors have varying opinions on this topic. BlackRock, one of the world’s largest traditional asset managers, recommends that investors allocate no more than 2% of their portfolio to Bitcoin, saying that this amount maximizes returns while limiting the risks associated with volatility.
Crypto-focused investment platforms, however, are more liberal, arguing Bitcoin is a great addition to an investment portfolio because it acts as a diversifying asset therefore, investors should allocate a larger percentage of their portfolio to the currency. Grayscale, a crypto ETF issuer, recommends allocating 5% and Swan, a Bitcoin-focused investment firm, recommends allocating up to 10% to Bitcoin.
And moving forward, some crypto-watchers believe that the current dip won’t last much longer. James Butterfill, the head of research at crypto asset manager CoinShares, expects the currency to stabilize soon.
“We’re getting close to that peak bearishness,” he said, adding that Bitcoin “seems to be showing quite a lot of resistance at around the $80,000 level.”
This story was originally featured on Fortune.com
