Is It Too late to Buy Bitcoin as It Threatens $100,000?

Bitcoin (CRYPTO: BTC) enthusiasts are rejoicing as the cryptocurrency continues to set new all-time highs. Earlier this month it surpassed its long-held high of just under $74,000 and in a few short weeks it's up more than 25%. Priced at $100,000, a target once many investors could only dream about, is squarely within striking distance as I'm writing this on November 20.

The timing of this run is hardly a coincidence, or so it would seem. The president-elect and his incoming administration are considered to be very friendly to Bitcoin and crypto as a whole. Investors are hoping he delivers on his campaign promises. What his actual policies will be here remains to be seen. But he has indeed signaled a pro-crypto approach, going as far as to say he intends to make America the "crypto capital of the world."

So, with Bitcoin nearing the $100,000 mark and "crypto euphoria" in full swing, is now a good time to buy?

Spot ETFs were a game changer

In January, the Securities and Exchange Commission (SEC) approved Bitcoin spot ETFs, enabling asset management giants like BlackRock to start offering these products. This decision significantly broadened market access for investors large and small.

These ETFs are traded through traditional brokerages the same way you would buy and sell shares of Apple, removing the complexities involved in trading through crypto exchanges. The ETFs are strictly regulated by the SEC, adding a layer of trust and legitimacy that has broadened the type of investor interested in Bitcoin.

The ETFs have spurred a wave of investment from institutional investors. Aside from the regulatory stamp of approval and ease of access, ETFs provide enhanced liquidity and lead to an "efficient" market in which the price of Bitcoin more accurately reflects its true value. This is a critical component for most investors of this kind.

Institutions are necessary for Bitcoin's long-term success

For Bitcoin to continue to grow, it needs to do so at a rate that justifies the perceived risk in the eyes of investors. Although the introduction of ETFs and the influx of institutional capital over the last few years has reduced that perception of risk, at least for now, it's still considered a more risky place to park your money than stocks. That means it needs to offer growth that outpaces the stock market, and the only way it can grow at that pace is if a whole lot more capital is invested.

Bitcoin has come a long way in broadening its base of investors, but it still remains a somewhat niche market. Less than 15% of adults own a digital asset while nearly two-thirds of Americans own stocks. There is still a lot of fear; 63% of U.S. adults say they are not very or not at all confident that crypto is safe.

Interestingly, despite their comparatively late buy-in, a much higher share of institutional investors have exposure -- about 60% have at least 1% of their assets invested. It seems to me that it will be an easier sell for those institutions to increase their exposure by 1 or 2 percentage points, than for a significant portion of the retail market to change their views on Bitcoin. But 1% to 2% represents a huge amount of capital, and it may bring the growth needed to push the more cautious retail investors into the market.

The question at hand

Warren Buffett famously said that investors should aim "to be fearful when others are greedy and to be greedy only when others are fearful." With Bitcoin smashing records and nearing $100,000, it seems that greed has overtaken the market and now might be a good time to hold off. That's a reasonable interpretation and if you are a more risk-averse investor, it could be the right move. No one wants to buy in at the top, right?

However, given the nearly two-thirds of Americans who are still fearful of crypto, perhaps we are still in the "when others are fearful" paradigm. Sure, buying in at the bottom will always be the best case. The problem is you and I are pretty bad at knowing just when that is. It's entirely possible to wait for a crash that never comes. And here's the thing -- over time, the penalty for buying in at the very top of bull runs isn't as big as you might think. Over the last 70 years, if you bought in each time the S&P 500 hit an all-time high, you would only return about 1% less than if you spread that investment out over time.

If you had bought at the last time Bitcoin hit a multi-year peak, in November of 2021, you would currently be up nearly 50%. That would be almost twice the return of the S&P 500 over the same period.

Should you invest $1,000 in Bitcoin right now?

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Bitcoin. The Motley Fool has a disclosure policy.