Amid meme-stock mania and a tech-startup-induced frenzy, Bitcoin hit new highs in late 2021, topping out at just over $68,000 per coin.
Since then, the price plummeted almost 50% in volatile trading to start the new year. The spectacular rise and fall of Bitcoin have left many wondering if it’s too late to invest.
Over the past few years, Bitcoin has become more entrenched in the economy, a sign of optimism for its future prospects. No stranger to cryptocurrency or controversy, Elon Musk announced that Tesla had purchased $1.5 billion of Bitcoin in early 2021. In addition, many mainstream financial platforms such as PayPal and Robinhood allow users to buy and sell Bitcoin.
Bitcoin has even gained adoption as a legal currency. “Last year, El Salvador decided to make Bitcoin legal tender. With other countries like Paraguay and Turkey looking to do the same, the future is bright for Bitcoin,” noted Stefan Ateljevic, an entrepreneur in the crypto space.
Perhaps the most significant nod toward accepting Bitcoin as a legitimate asset class is the approval of the first Bitcoin futures ETF that allows investors to gain exposure to Bitcoin through futures contracts. Similar to stock or commodity futures, Exchange-Traded Funds let you bet on cryptocurrency going up, without taking huge risks if it declines.
Currently, Bitcoin represents a tiny portion of all investment assets held by hedge funds, pensions, retirement accounts, and the like. If trends continue toward greater institutional adoption, that increase in demand could cause Bitcoin prices to rise.
In an interview with Barron’s, Cathie Wood of ARK Invest believes that if institutional investors added a 5% allocation to Bitcoin, the price could easily rise to the $400,000 to $500,000 range.