Bitcoin Was Down 16% in 30 Days. Here's Why I Bought More.

Until Sunday's social-media announcement from President Donald Trump about the planned strategic cryptocurrency reserve, Bitcoin (CRYPTO: BTC) wasn't doing so well, falling by 17% in the prior month. Now, it's almost entirely recovered. With an investment in stocks, that kind of volatile performance could send investors running for the hills.

Still, I have been buying Bitcoin, and I plan to continue to buy even more of it. Here's why.

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This asset is built for holding forever

There aren't too many assets with a more favorable balance of supply and demand dynamics over the long term, especially not in the cryptocurrency sector.

As you've probably heard, there can only ever be 21 million Bitcoins. Roughly 5.5% of those have not been been mined yet. And the difficulty of mining them will increase significantly during the coin's halvings, which occur roughly every four years. The most recent halving was in 2024.

There are many implications of the halving cycle. The most important is that the supply of new Bitcoins reaching the market will, on average, decrease over time. Therefore, if the level of demand for the coin remains constant, its price will trend upward, as supply is becoming more constrained.

That doesn't mean the price will consistently go up in any given period. It only means that Bitcoin supply is limited, while demand is not, and that will tend to drive the price up.

The halving cycle also puts time pressure on buyers to leave the sidelines and buy some of the coin regardless of its absolute price, as there is an inexorable force that makes buying today a more attractive proposition than buying at an even higher price, which history has shown to be roughly equivalent to when the coin will be scarcer.

Tiny buys make it easier to stomach falling prices

Buying assets when they're down can be a bit frightening. To mitigate the fear, it's best to take your emotions out of the decision-making loop by committing to regular small purchases regardless of price, via dollar-cost averaging.

When you dollar-cost average, it spreads out your cost basis over many different price levels. The point is to ensure that you're buying over time regardless of whether the popular sentiment on any given day is that the price of Bitcoin is "high" or "low" -- those words don't matter anyway, because you're thinking about the price of it in 10, 20, or 30 years in the future. If you can't think on those time frames, it can still be a good asset to buy, but your odds of getting a favorable price when you want to exit is somewhat more a matter of chance than it would be otherwise.

Remember, if an asset falls 20%, it can easily fall another 20%, then another, and another, and another. Nobody wants to buy something that just went down a lot. So it's generally less painful to make your individual purchases on the small side. But the sooner you rid yourself of the price-action-crazed mentality and simply commit to buying Bitcoin whether the price is up or down, the sooner you can start to generate significant wealth over time. And that's the point of dollar-cost averaging. If you commit to doing it, you're locked into investing whether or not you'd prefer to chicken out.

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*Stock Advisor returns as of March 3, 2025

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.