Is now a good time to invest in bitcoin? What experts say

Over the last few months, however, things have started to look up. Crypto investors have become increasingly convinced that the SEC would approve a years-long effort by fund companies to bring a spot bitcoin exchange-traded fund to market, a move that crypto boosters expected to dampen demand for the popular coin will fuel.

By the time news broke on January 10 that 11 new bitcoin ETFs would begin trading, crypto investors were taking a victory lap, having seen the coin’s price rise 155% in calendar year 2023.

So what now? Are we headed for another crypto bull market, or have bitcoin enthusiasts gotten ahead of themselves?

“It’s definitely an inflection point,” said Brian Vendig, president of MJP Wealth Advisors in Westport, Connecticut.

Here’s what he and other experts say to expect from here.

The new wave of bitcoin ETFs is making it easier than ever for investors in more traditional assets, like stocks and bonds, to dip their toes into crypto. Instead of opening a separate account to buy crypto – often with high trading fees – investors in the ETFs can hold bitcoin right alongside their other investments in their brokerage accounts.

This is just the beginning, says Matthew Sigel, head of digital asset research at VanEck, an investment firm offering one of the 11 new funds.

“We think this was a big step forward that will unlock significant demand, given the cost savings for the retail buyer and security available to institutional buyers,” he says.

The new ETFs will soon allow advisors who trade with high-net-worth clients and big-money institutions to start incorporating crypto into their portfolios, he adds.

“They don’t yet have the ability to put these bitcoin ETFs into discretionary client portfolios,” Sigel says. “But we can see that several banks and brokers are already preparing these models, which we expect to emerge later this year.”

Also expect more new crypto ETFs – and in different flavors.

“It seems inevitable that we will have ETFs tied to ether as a secondary cryptocurrency for people to invest in,” said Todd Rosenbluth, head of research at VettaFI. In the meantime, he says, “the door is now open to a range of ETFs that include bitcoin as well as other assets.”

Experts say it could be as simple as portfolios that combine bitcoin exposure with mainstream investments, such as those in the S&P 500. More complex so-called alternative strategies are also likely to emerge, such as funds that use a bitcoin stake to counter hedging . the performance of other investments.

The rapid rise in bitcoin’s price lately would feel great for a traditional asset, like a stock or bond, but isn’t really anything to write home about in Cryptoland, says Stephane Ouellete, founder and CEO of FRNT Financial.

“You’ve seen some speculation come in about the announcement of bitcoin ETFs, but all the metrics we look at to determine where we are in the market cycle tell us that we’re so far away from the FOMO market where everyone and their dog talks about crypto,” he says.

Measures such as Google Trends searches for bitcoin and cryptocurrency, funding for crypto companies and investor trading volumes are all relatively muted, he says. In other words, if the crypto market is going to enter another bull trading cycle, we are in the very early days of it.

However, that doesn’t necessarily mean it’s time to stock up. Bitcoin experts don’t buy because of an ETF rollout. Rather, they believe in bitcoin’s long-term potential as a store of value and as an alternative payment system in developing countries. They believe in a future where blockchain technology evolves into a larger part of the American economic ecosystem.

This should never happen. And even if you believe in a long-term thesis, remember – cryptocurrencies don’t trade based on underlying fundamentals like stocks do. This means prices move purely based on investor activity.

“It’s all still speculation. It hasn’t changed,” says Vendig.

If you’re thinking about adding crypto to your portfolio, ask yourself what role it can play in getting you to your personal financial goals, he says.

“If an investor can answer that appropriately, you can actually figure out what size you should be,” he says. “Do you want to dip your toe into this asset class? Or is that asset class not even rational for you as an investor?”

If you’re investing in crypto, Vendig recommends keeping things small. “I’d say 1% on the more conservative side, and no more than 5% of your total portfolio if you’re a growth-focused investor.”

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