Crypto Market Sell-Off: Is It Time to Buy Bitcoin?

Even die-hard crypto investors are getting worried right now. Bitcoin (CRYPTO: BTC) is now down 18% from an all-time high of $109,000 in mid-January, and trades around the $89,000 level on March 3. That downtrend seemed unthinkable just a few months ago, when the election of a new pro-crypto president was supposed to send Bitcoin to stratospheric new highs.

So is this a classic "buy the dip" opportunity for Bitcoin, or the end of the crypto bull market rally, as many investors and analysts are now warning? In order to answer that question, it's helpful to consider three key factors.

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Bitcoin's historical track record

Once you analyze Bitcoin's historical track record over more than a decade, one thing becomes immediately clear: A decline of 25% is pretty much par for the course for Bitcoin. For example, in the period from 2016 to 2018, as Bitcoin soared to a new all-time high, it had downturns of 38%, 38%, 33%, 38%, 36%, and 29% along the way.

You've probably heard that Bitcoin is one of the world's most volatile assets. Well, this is what volatility looks and feels like. From a mathematical perspective, volatility is just a statistical measure of how much Bitcoin can go up or down within a specific period of time. The higher the volatility, the larger the price spike up or down. That means Bitcoin can skyrocket in price, but it can also collapse instead -- often without any warning at all.

In 2023, Cathie Wood of Ark Invest analyzed the historical performance of Bitcoin over the past decade, and found that it had five distinct periods of time when the total drawdown in value was 77% or higher. If you're panicking now, when Bitcoin is down 25% from an all-time high, imagine the panic you would feel if Bitcoin fell 77%.

But you know what? Bitcoin has collapsed in price many times, but it has eventually rebounded to hit a new all-time high. In 2024, Wood ran the numbers and determined that, no matter what longer-term time horizon you look at over the past seven years, Bitcoin has always been the best-performing asset.

That's why the "buy the dip" mantra has become so popular with Bitcoin investors. You're essentially getting Bitcoin at a 25% discount right now, before it continues its seemingly inevitable upward ascent.

Bitcoin's future projections remain unchanged

That might be why high-profile investors continue to double down on Bitcoin, even as its price declines. For example, Michael Saylor just bought another $2 billion worth of Bitcoin for his company, Strategy (formerly MicroStrategy). He also continues to predict that Bitcoin will eventually break through the $10 million mark at some point in the future, before soaring as high as $49 million per digital coin.

Despite its disastrous start to the year, Bitcoin is still faring better than just about any other major cryptocurrency. Bitcoin may be down 14% for the year, but Ethereum is down 30%, and Solana is down 25%. More speculative cryptocurrencies (such as meme coins) are down anywhere from 60% to 80%. Bitcoin may not be the "safe haven" asset that it's often portrayed to be, but it's still a lot safer than most cryptocurrencies right now.

Institutions are continuing to buy Bitcoin

The good news, if you're a Bitcoin investor, is that large institutional investors appear to be ramping up their exposure to Bitcoin. According to the latest 13F filings with the SEC, large institutional investors (those with more than $100 million in assets under management) tripled their exposure to Bitcoin over the past quarter. They have now invested $38.7 billion into Bitcoin via the new spot Bitcoin exchange-traded funds (ETFs).

Image source: Getty Images.

This appears to be a long-term trend, as more institutional investors warm up to the idea of Bitcoin being a stand-alone asset class with its own unique risk-reward profile. According to investment firm Bernstein, this institutional buying is still in the early stages.

If institutions continue to buy, Bitcoin could double in price this year. At the beginning of the year, Bernstein predicted that Bitcoin would hit a price of $200,000 in 2025. And, at the end of February (amid the current market turmoil), it reiterated that price forecast, suggesting that now is the time to buy the dip.

HODL for the long haul

Bitcoin has historically been a very volatile asset, so the current period is nothing new. If history is any guide, then Bitcoin should rebound once again. That means now might be another great opportunity to buy Bitcoin.

But it will not be easy, and it will not be fun. Investing in Bitcoin is for the long-term investor willing to HODL (hold on for dear life) through thick and thin, knowing that there could be a massive payoff in the long run.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.