Getty Images; Alyssa Powell/BI
If you go by some of the many cautionary investing adages — like "buy low, sell high," or Warren Buffett's "be fearful when others are greedy" — it may be tough to argue that bitcoin is a good buy right now.
The days when bitcoin traded at mere fractions of a cent are long gone. The cryptocurrency's price is anything but low, at least relative to what it was, especially after a 55% rally to over $108,000 following Donald Trump's reelection.
But some market experts are taking the opposite philosophy with bitcoin and believe it's a fine time to buy, thanks to favorable fundamental trends.
"We believe it is the period leading up to large-scale adoption where the biggest future return potential could lie," Samara Cohen, the chief investment officer of ETFs and index investments at BlackRock, wrote about bitcoin in a recent note.
Robert Cannon, a financial advisor at Experity Wealth, shares this view. "We're basically in the beginning, even though $100,000 seems like a high number," he told BI. He recommends investors allocate about 1-10% of their portfolios to crypto, depending on risk tolerance.
Cannon has seen inklings that other governments, such as Argentina, could adopt bitcoin as a strategic reserve asset, sending the cryptocurrency's price even higher.
"You want to get there before the big money is there," Cannon said. In other words, don't sit out on the bitcoin rally just because you think the ship has already sailed.
Bill Miller IV, the chief investment officer and portfolio manager at Miller Value Funds, likens bitcoin to "digital gold" due to its scarce and decentralized nature.
But the overwhelming outpour of recent interest is hardly a guarantee of bitcoin's success. It is famously volatile and prone to dramatic price drops — hence why bitcoin bulls like BlackRock recommend exercising discretion and educating yourself on the risks when investing. But as institutional investors continue to pile in and talks about establishing a national bitcoin reserve swirl in Washington, it's increasingly apparent that the asset is being legitimized in the investing landscape.
Luckily for investors, there's never been a more convenient time to be bitcoin-curious. As the cryptocurrency has gained steam in the last few years, mainstream brokerage firms have picked it up. You can purchase bitcoin directly through some online brokerages such as Fidelity, Robinhood, and Interactive Brokers. For those without $100,000 to drop on a bitcoin, these exchanges offer the opportunity to purchase fractional shares.
However, others like Charles Schwab and E-Trade don't provide that ability.
If you want to hold bitcoin directly but can't buy directly through your traditional brokerage account, fear not. There are several centralized crypto exchanges that provide a platform for buying and selling bitcoin, such as Coinbase, Kraken, and Gemini.
Some bitcoin purists prefer buying on a decentralized exchange, similar to how some gold investors prefer buying bullion.
"If you own bitcoin on a centralized entity, you force someone else to buy it on your behalf, but you don't actually hold the bitcoin," Miller said.
Decentralized exchanges facilitate peer-to-peer trading without a broker, adding an extra layer of privacy and security. However, a decentralized exchange isn't the most beginner-friendly way to invest, as they have complex fee structures and don't permit exchanges between fiat and crypto.
The first spot-bitcoin ETF debuted in the US in January 2024. A spot ETF provides investors with an accessible way of gaining exposure to bitcoin on a fully regulated traditional exchange. The funds hold bitcoins in a secure digital vault managed by registered custodians and issues shares to correspond with the number of bitcoins held.
Bitcoin futures ETFs, which hold bitcoin futures contracts instead of actual bitcoins, are another investment vehicle. However, because they hold financial derivatives, these ETFs might not follow the price of bitcoin as closely as a spot ETF and can experience increased volatility due to the risks associated with futures contracts.
Bitcoin ETFs are Cannon's go-to recommendation for new investors in the crypto space, as investors don't have to worry about directly holding bitcoin in a cryptocurrency wallet: "It's just like if they bought a stock," he said. He likes BlackRock's iShares Bitcoin Trust ETF (IBIT) in particular.
Other examples of bitcoin ETFs include the Fidelity Wise Origin Bitcoin Fund (FBTC), Grayscale Bitcoin Trust ETF (GBTC), and the ProShares Bitcoin ETF (BITO).
Similar to how central banks stockpile gold, some of the market's biggest companies are building up their bitcoin reserves, even if their business operations have nothing to do with bitcoin. John Haar, managing director at the bitcoin financial services firm Swan Bitcoin, has seen investors increasing their bitcoin allocation indirectly by buying these companies' stocks.
Business intelligence company Microstrategy (MSTR) is the biggest example in the market right now. Other examples of companies adding bitcoin to their balance sheets include biotech company Semler Scientific (SMLR) and Japanese investment firm Metaplanet (MTPLF), according to Haar.
Investors can also get bitcoin exposure by going straight to the source and buying stock in bitcoin mining companies, Haar added. As a decentralized asset, bitcoin depends on a network of users to keep a record of transactions and verify new ones. Bitcoin minerrs use crypto software and hardware to solve complex puzzles and confirm the addition of blocks to the public ledger.
Haar pointed to two examples: Riot Platforms (RIOT) and Mara Holdings (MARA). These companies operate data centers to mine bitcoin and other cryptocurrencies and provide auxiliary cryptocurrency services.
