When is the best time to buy an asset – when everybody’s talking about it, or when nobody is talking about it? Before loading up on Bitcoin (BTC-USD), I invite you to conduct a serious gut-check and think about whether chasing after new highs is the best strategy. Don’t get me wrong. I expect Bitcoin to rally over the very long term.
After all, the BTC price should be higher years from now if the demand increases and the supply remains limited to 21 million Bitcoins. Yet, just like with stocks and other assets, cryptocurrency is vulnerable to pullbacks after vertical price moves. So, even if you’re a Bitcoin believer, it’s important to time your entry with caution and consideration.
Bitcoin’s Major Milestone Moment
Finally, it happened. BTC broke above its previous peak of approximately $69,000 and even topped $70,000 recently.
That’s a milestone moment, no doubt, and cryptocurrency enthusiasts have every right to celebrate it. Even The Wall Street Journal is talking about Bitcoin’s new all-time high now.
That’s why I’m concerned, though. I’m not in the habit of buying assets that are on the front page in the financial press. This BTC move has “too late” written all over it, in my humble opinion.
You’re seeing calls for BTC to hit $100,000 in the near term. Cryptocurrency options traders are betting Bitcoin will reach $200,000. This type of thing (the ultra-bullish calls and the speculative frenzy) happens every time the Bitcoin price surges.
In addition, JPMorgan Chase analysts think that BTC’s rally might alter the Federal Reserve’s interest-rate policy. Is it possible that some people are overstating Bitcoin’s importance in these heady times?
You Know the Bitcoin Catalysts – and So Does Everybody Else
The catalysts pushing BTC higher aren’t difficult to identify. First, the market is excited about the approval of spot Bitcoin exchange traded funds. Second, cryptocurrency traders are preparing for the upcoming Bitcoin halving event, which is expected to take place on April 19.
Don’t jump to the conclusion that the market will bid up the BTC price because of these events. In an efficient market, traders have already priced these known events into Bitcoin.
The time to load up on BTC was when no one was enthused about it, and when the financial press wasn’t buzzing about ETFs and halving events. Really, then, the time to be a buyer was in late 2022, when Bitcoin was $16,000.
It’s easy to say that in hindsight, of course. Still, my point is that price chasing isn’t necessarily the best policy. Besides, it’s not as if Securities and Exchange Commission Chairman Gary Gensler is suddenly a Bitcoin fan.
Gensler recently declared that Bitcoin is a “highly speculative, volatile underlying asset,” and that the cryptocurrency field is “rife with abuses and fraud.” Hence, prepare for regulatory pushback against Bitcoin in the future, and don’t be too surprised if BTC is volatile in the coming months.
Bitcoin Chasers Might Get Punished
If you’re a set-it-and-forget-it Bitcoin holder, then your entry price might not matter too much. Regardless of your time frame, I would encourage you to consider waiting for the BTC price to pull back before jumping in.
Sure, there are positive catalysts for BTC, but the market is already aware of them. This could be a good time to take profits on your Bitcoin holdings. Or, at the very least, don’t feel the need to add to your position, as Bitcoin is susceptible to a near-term drawdown.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
