You've seen the headlines. Bitcoin skyrockets to an all-time high, then crashes. Two months later, it doubled in value again. As a potential investor, you want to know: What’s next? Should I invest in Bitcoins? You know that Bitcoin's volatility is part of the allure and danger of investing in it. To make an informed decision, you must research, analyze, and develop a strategy on Bitcoin annual returns before buying. This article will help you get started so you can confidently decide whether to invest in Bitcoin and create a strategy that maximizes returns while minimizing risks.
One way to understand Bitcoin and make an informed investment decision is through Bitcoin Magazine Pro's analysis. Their research helps readers achieve their goals—like confidently deciding whether to invest in Bitcoin and developing a strategy that maximizes returns while minimizing risks—by providing clear and concise information about Bitcoin and its market trends.
Is Bitcoin a Good Investment?
Bitcoin’s price changes quickly, making it a popular but volatile investment. After hitting an all-time high of over $67,000 in November 2021, the price of Bitcoin fell to about $16,000 by December 2022.
By December 2024, Bitcoin’s price had increased to over $100,000. Bitcoin’s unpredictable nature can be exciting, but it also comes with risks that potential investors must carefully consider.
What You Should Know About Bitcoin
Bitcoin is a digital currency that allows people to buy goods and services electronically. The decentralized, peer-to-peer network enables users to send and receive payments without a central authority like a bank or government. One of Bitcoin’s key features is its limited supply. There will only ever be 21 million Bitcoins in existence.
This capped supply, combined with increasing demand, makes Bitcoin valuable. Bitcoin has many potential benefits, including:
- Increasing adoption
- Decentralization
- Limited supply
Many people view it as an innovative technology that disrupts traditional financial systems. Others see it as a way to hedge against inflation and economic uncertainty.
Volatility, Regulation, and Market Uncertainty
It’s essential to consider the risks of investing in Bitcoin. The price of Bitcoin can swing dramatically. For instance, in 2021, Bitcoin started the year at about $30,000. After reaching its all-time high in November, it tumbled to about $20,000 by the end of December.
New regulatory scrutiny, tax changes, and global economic factors contributed to the downturn. The sector has seen massive failures, including the collapse of the Terra blockchain and the bankruptcy of significant exchange FTX, which shook investor confidence.
Bitcoin Had an Incredible Year in 2024
Bitcoin had an incredible year in 2024. On Dec. 4, 2024, its price topped $100,000 for the first time, a long-awaited milestone, and some analysts expect it to go even higher this year.
This milestone follows a series of record highs following the November 2024 presidential election. Investors widely believe Donald Trump will be a pro-BTC (and anti-regulation) president.
What Kind of Investment is Bitcoin?
After over a decade, there’s still debate over what kind of investment Bitcoin is. Owning Bitcoin is not like owning stock in a company. Unlike a business, Bitcoin doesn't generate revenue by selling products or services. It doesn't issue dividends. It also doesn’t have a CEO, board of directors, or any other centralized group that sets goals or can be held accountable.
Security, Commodity, Currency, or New Asset Class
Some have argued Bitcoin should still be considered a security. Others suggest it is a commodity. Commodities are associated with raw materials like:
- Metal
- Grain
- Milk
The Commodity Futures Trading Commission regulates commodity markets. This government agency regulates foreign currency trading and is most active in Bitcoin regulation.
Still, others say it’s a currency you can use to pay for goods and services. While some businesses accept Bitcoin, it’s far from widespread practice. There’s also the possibility that it’s a new asset class altogether.
Investing in Bitcoin: The Upsides
Bitcoin historically has offered the potential for high returns. It’s decentralized. That said, many people choose to trade and store Bitcoin on centralized platforms. Bitcoin has the potential to be a non-correlated asset, similar to gold.
This means it may not follow the trends of other assets, like stocks. While Bitcoin has had moments of non-correlation with the S&P 500 in the last decade, it has yet to prove itself as a genuinely non-correlated asset.
Investing in Bitcoin: The Downsides
As referenced above, Bitcoin’s price can go up or down. Unlike traditional financial exchanges, BTC exchanges don't have circuit breakers that automatically pause trading when prices diverge too quickly.
Bitcoin markets also trade 24/7, and dramatic dips can happen anytime. Bitcoin’s exponential growth and ability to maintain its title of most valuable asset can mask the fact that its ascent has not been linear.
The Highs and Lows of Bitcoin: Navigating Volatility and Preparing for Potential Risks
The upside of buying Bitcoin for a dime in 2010 is clear. But with volatility comes significant downsides, too. Someone who bought Bitcoin in 2013 would have seen their investment tumble 80% — and it wouldn’t be above water for another three years.
Recent highs don't promise continued returns. Anyone investing in Bitcoin will hope for the best, but they should also be prepared for big downturns. While Bitcoin has recovered many times, it could also go to zero—for example, if several platforms fail and there's a massive sell-off.
The Risks of Irreversible Transactions and Limited Consumer Protections in Bitcoin
Transactions are irreversible. People have lost millions of dollars of Bitcoin because they lost or forgot their wallet credentials. Bitcoin exchanges lack basic consumer protections, like insurance protection from the Securities Investor Protection Corp. and the Federal Deposit Insurance Corp., found in traditional financial products.
Related Reading
- Is Bitcoin Worth Investing In
- How to Buy Bitcoin ETF
- How Much to Invest in Bitcoin
- Is Bitcoin a Buy Right Now
- Can You Sell Bitcoin for Cash
- Is Investing in Bitcoin Profitable
- Should I Invest in Bitcoins
- How Much to Invest in Bitcoin to Become a Millionaire
- Is Bitcoin Going to Keep Going Up
- Is Bitcoin Safe to Invest In
Should I Invest in Bitcoins in 2025?
Bitcoin, once viewed as a niche investment for techies and early adopters, is now drawing the attention of mainstream investors. In fact, according to a 2023 survey by the Financial Planning Association, almost half of all Americans think Bitcoin will one day be a reliable investment.
But before you jump into this speculative asset, it’s crucial to understand the current market outlook for Bitcoin and the potential risks of investing.
What Experts Are Saying About Bitcoin in 2025
Recent projections from experts about the potential price of Bitcoin in 2025 vary widely. Some suggest it may hit $1 million, while others think it could go to zero. Of course, the truth will likely lie somewhere in between.
Optimistic Outlooks for Bitcoin in 2025
According to some analysts, Bitcoin will reach $1 million by 2025. In a March 2023 report, an investment firm ARK Invest analyst, Jesse Myers said, “The next Bitcoin halving is set for April 2024. Based on historical price performance and cycles, I expect Bitcoin will rally to $1 million by mid-2025.”
The report notes that these price targets are based on Bitcoin’s ability to generate increasing returns over time, driven by its scarcity and growing adoption as an alternative monetary system.
Similarly, the stock-to-flow (S2F) model developed by analyst PlanB predicted the price of Bitcoin would reach $100,000 by the next halving in 2024 and $1 million by 2026.
Cautious Outlooks for Bitcoin in 2025
Of course, not everyone is so bullish about Bitcoin’s future. In a recent report, the Financial Times warned that “Bitcoin’s boom is over.” The article cited how it had failed to recover from its dramatic decline in 2022, dismissing its recent rally as a “dead cat bounce.”
And while it acknowledged that Bitcoin’s price may rise again, it stressed that BTC is likely to remain correlated to risk assets and fail to return to its previous highs.
How Will Macroeconomic Factors Impact Bitcoin in 2025?
One of the primary factors that will influence Bitcoin’s price in the coming years is the macroeconomic environment, particularly as it relates to inflation and interest rates. Bitcoin is often touted as a hedge against inflation.
Indeed, BTC has rallied over the past few years in response to fears surrounding rising consumer prices. Inflation has recently shown signs of cooling, so Bitcoin’s price has struggled.
The Impact of Inflation and Federal Reserve Policies on Bitcoin Prices
As of late May, the consumer price index (CPI) had increased by just 4.0% year over year—its lowest level since early 2021. Meanwhile, Bitcoin has plummeted by roughly 30% since mid-March, when it was trading at around $28,500.
Furthermore, the Federal Reserve’s (Fed) recent projections around fewer rate cuts in 2025 saw Bitcoin prices sink. If the Fed slows its pace for rate cuts, Treasury yields will remain high and attract more investors than riskier assets like Bitcoin.
What Should I Know Before Buying Bitcoin?
While all the above pros may tempt you to consider investing in BTC, financial advisors remain cautious about recommending it to clients and suggest allocating only a small portion of your portfolio.
Its pricing is highly volatile and, therefore, highly risky. For all its nosebleed ascents, Bitcoin also has had some gut-punching plunges. Between November 2021 and November 2022, for example, the price of Bitcoin dropped 75%, from $64,455 to $16,196, according to data on coinmarketcap.com.
What Role Might Bitcoin Play in My Portfolio?
When asked what role Bitcoin might play in a person’s overall financial investment and savings portfolio—which you might use to buy a house, start a family, pay for college, or save for retirement—one substantial area of consensus among planners is to not invest any money in Bitcoin for anything you must do in the next five years.
“Due to its volatility, I would avoid using Bitcoin for short-term savings goals. And for the same reason, I would recommend only allocating a tiny percentage of my long-term investment strategy to it,” said Trent Porter, a certified financial planner and public accountant at Priority Financial Partners. He advises clients who insist on exposure to limit their portfolio allocation to Bitcoin to no more than 5%.
The Role of Bitcoin in a Diversified Portfolio: Expert Advice on Allocation
CFP Mike Turi, a founding partner of Upbeat Wealth and an accredited portfolio management adviser, is more conservative. He doesn’t recommend that clients allocate more than 3% to Bitcoin if they allocate any.
“I would not recommend using Bitcoin as the main strategy to achieve your financial goals. If it’s extra investable money that can help you get there faster? Sure. Don’t miss out on valuable opportunities by overexposing yourself to an asset that you might not fully understand,” Turi said.
Balancing Speculative Investments: Core and Explore Strategy with Bitcoin
From Pulse Financial Planning CFP Matt Elliott’s perspective, tax-advantaged 529 plans will always be the better option for college because they can be diversified and carry less risk. “It is one thing to bet your money on Bitcoin, but another to bet a child’s college savings on it,” he said.
Elliott can see a minor role for Bitcoin in a long-term retirement portfolio. He recommends his clients use a “core and explore” strategy. Ninety-five percent of your assets should be in a core, well-diversified portfolio designed with your timeframe and risk tolerance. The other 5% can be used for more speculative investments (such as Bitcoin) if you have little debt and are willing to accept the risk of losing what I put in,” he said.
Experts Advise Caution When Investing In Bitcoin
Asset manager Blackrock recently suggested that a portfolio with a 1%- 2% Bitcoin exposure is a “reasonable range.” While it’s important to note that Blackrock runs the largest spot Bitcoin ETF, the iShares Bitcoin Trust (IBIT), some advisors also agree with having a limited allocation to Bitcoin.
“If the price does appreciate...it will still add meaningful outperformance to the portfolio,” said Malcolm Ethridge, a certified financial planner (CFP) and Managing Partner at Capital Area Planning Group. “But if it doesn't live up to its promise, and the price falls to zero, it wouldn't completely wipe them out either.” Bitcoin is a highly volatile asset; having only a small investment could mean capping the downside.
Evaluating Bitcoin as a Speculative Investment: Volatility, Purpose, and Long-Term Strategy
“This should be viewed as outside of core investments because they’re so volatile, and you can lose a significant amount of money,” said David Rosenstrock, a CFP and founder of Wharton Wealth Planning. Scott Sturgeon, CFP and founder of Oread Wealth Partners advises people to reflect on why they want to invest in Bitcoin.
“If you want to invest in it because you see it as an uncorrelated asset or as a hedge against inflation, maybe that’s justification to invest,” said Sturgeon. “Conversely, if you want to buy it just because it’s gone up 120% year-to-date, I might suggest you’re just chasing returns and are speculating more than investing.”
Related Reading
- Bitcoin Technical Analysis
- Is It Too Late to Invest in Bitcoin
- Bitcoin as an Investment
- Bitcoin Support and Resistance Levels
- If I Invest $20 in Bitcoin Today
- How Much Is It Worth
- How to Buy Bitcoin with Credit Card
- What Is the Best Bitcoin to Invest In
- If I Invest $100 in Bitcoin Today
- How Much Is It Worth in 2030
- How to Buy Bitcoin for Beginners
- Do You Have to Pay Taxes on Bitcoin
- How to Start Investing in Bitcoin
- Bitcoin Investment Strategy
- How to Invest in Bitcoin UK
- How Much Does It Cost to Invest in Bitcoin
- How to Buy Bitcoin on Cash App and Send to Another Wallet
Questions to Ask Yourself Before Buying Bitcoin
Assess Your Readiness to Invest in Bitcoin
Bitcoin is a risky investment. So, before you buy, assess your readiness for the ups and downs of the market. Ask yourself if you’re financially stable enough to absorb a significant loss. One way to gauge your readiness for a potential drop in Bitcoin’s value is to imagine what would happen to your finances if the price plummeted 50% tomorrow.
Would you be left in a pinch? If the answer is yes, you should reconsider investing in Bitcoin, as there’s a good chance you may need to sell quickly to cover an unexpected expense.
Get Real About Your Risk Tolerance
Even seasoned investors can struggle with the volatility of Bitcoin. “I still see Bitcoin more as a gamble than a reliable investment,” says an investment expert and author of The Intelligent Investor Benjamin Graham. “Is it a risk you can afford to take? Consult your future self. What will happen if it doesn’t work out?”
If you do decide to invest, set some ground rules for yourself from the jump. “The most challenging aspect of the Bitcoin craze is that more retail investors are entering the market at its peak when euphoria is highest,” Turi says. “On the flip side, they’ve never really established an exit strategy. Investors need to set their exit price to avoid being driven by emotion.”
Consider a More Low-Risk Approach to Bitcoin
If you want to put money into Bitcoin, you can buy it directly and store it in your virtual wallet or on a digital asset platform like Coinbase. Both options can get complicated and carry risks. You can access it more simply and safely by buying into one of the new SEC-regulated spot Bitcoin ETFs.
Investors have poured nearly $28 billion on net into these ETFs, and their combined net asset value was approaching $96 billion as of Friday, according to data from Morningstar Direct. “Using a Bitcoin ETF for exposure is the easiest option for most individuals who are not dedicated Bitcoin investing experts,” Porter says. “Due to risks such as cybersecurity threats and the possibility of losing private keys, holding Bitcoin through an SEC-regulated ETF is by far the safest option.”
Direct Ownership of Bitcoin vs. Leveraged Bitcoin Assets: Insights from a CFP Purist
Douglas Boneparth, CFP and President of Bone Fide Wealth educates his clients about Bitcoin but doesn’t solicit investments. He started investing in Bitcoin in 2014 and prefers investing directly in Bitcoin versus a spot ETF or a stock like MicroStrategy (MSTR), a Bitcoin holding company considered a proxy for BTC.
“I’m a purist and believe that if you're going to own Bitcoin, the best way to do that is by actually owning BTC itself and storing that on a hardware wallet,” said Boneparth. “As far as Microstrategy goes, you're essentially buying leveraged Bitcoin—they’re loading their balance sheet with Bitcoin and using a lot of debt to go out on the open market and buy it. You’re buying an even riskier Bitcoin asset.”
Spot ETFs vs. Direct Bitcoin Ownership: A Beginner’s Guide to Investing
Advisors say spot ETFs can be a better option for new investors. That way, you would not need a Bitcoin wallet to hold it and could conduct the ETF transactions through your brokerage account. However, just make sure to pay attention to the fees.
“If you’re new to the space and you’re a long-term investor, using an ETF makes it relatively easy,” said Sturgeon.
Save 30% on Bitcoin Magazine Pro's Bitcoin Analysis Tool With Our Annual Plan
Bitcoin Magazine Pro is an essential resource for making informed decisions about investing in Bitcoin. The platform includes a wide array of analytical tools to help Bitcoin investors understand the factors that influence the price of Bitcoin.
The service offers a range of free Bitcoin charts that cover key topics in the Bitcoin market. Each of these charts includes helpful descriptions to explain the data and how it works. For those looking to dig deeper, paid subscriptions unlock even more features, including:
- Exclusive indicators
- Chart alerts
- In-depth market reports and more
Whether you’re a casual investor wanting to make sense of Bitcoin or a seasoned analyst looking for the latest research, Bitcoin Magazine Pro can help you find the insights you need to make informed decisions about Bitcoin.
Related Reading
- Best Places to Buy Bitcoin
- Investing in Bitcoin Companies
- Gold vs Bitcoin Chart
- Bitcoin vs Real Estate
- Bitcoin vs Stock Market Chart
- Best Bitcoin Stocks
- Bitcoin vs Ethereum
- Risks of Investing in Bitcoin
- Investing in Bitcoin ETF
- How to Invest in Bitcoin with Little Money
- Bitcoin vs Bitcoin ETF