Bitcoin is decidedly in what investors call a “bull market”.
Depending on your plans to invest, that can mean a number of things. That’s partially because of the nuanced nature of investment and speculation. It’s also partially because of the controversial idea of cryptocurrency as a speculative asset.
Here, we’ll talk about what the bull market means and what it should mean to you.
The Bull and the Bear
Speculative assets are assets that investors buy with the intention of making money on by selling them later. Conventional speculative assets include stocks, bonds, and commodities like oil and precious metal. The value of a speculative asset varies based on, well, how much people value it.
Speculative asset markets are usually categorized as being bull markets or bear markets. During a bull market, the value of a speculative asset is going up. Strictly speaking, the term bear market means that the value is going down but the term is also used to describe a period of value stability.
You can think of the bull market as sweeping its horns up to attack and the bear swiping its claws down to attack. You can also think of the bull charging and the bear lying down and hibernating.
Bitcoin as a Speculative Asset
The relationship between Bitcoin and investment is ideologically tense.
Bitcoin is intended to be a currency rather than a speculative asset. As a result, some crypto zealots don’t like it when people talk about cryptocurrency in investment terms like we’re doing now.
However, because cryptocurrencies – with the exception of stablecoins – aren’t backed by anything, their value is strictly defined by demand. That means that they operate very much like speculative assets. At least, for now they do. Ideally, one day, enough people will adopt crypto that the value stabilizes and starts to look more like a currency and less like a speculative asset.
Until that day comes, we can pacify ourselves by reminding ourselves that speculative assets and established currencies don’t operate in strictly mutually exclusive terms. People can and do transfer money from one form of currency to another to make money.
Plus, as long as Bitcoin is transitioning from something like a speculative asset to something like a conventional currency, there’s nothing wrong with making some money on it.
One area where crypto and speculative assets differ is in terms of how their value is used. Value in stocks or most commodities are only realized when they are sold. Crypto, on the other hand, can be spent on goods and services. While selling crypto can be seen as betrayal, using it is seen as evidence of adoption.
At least for now, let’s let ourselves talk about crypto like a speculative asset.
Buying in a Bull Market
There are ups and downs to buying speculative assets in both bull and bear markets.
If you buy into a speculative asset in a bear market and it turns into a bull market, you make more on the investment. People who bought into Bitcoin during the Crypto Winter are definitely happy with their decision right now. Of course, it’s also possible for a bear market to go further down. So, buying in a bear market doesn’t completely protect from losses.
If you buy into a speculative asset in a bull market it’s more expensive because the value is higher at the time. However, if the bull market continues, you can make money fairly quickly. If the bull market turns, of course, you can lose a lot even faster. So, buying in a bull market is a high-risk and high-reward venture.
So, is this bull market the time to invest?
Is Now the Time to Buy?
From a Bitcoin-as-market perspective, the short answer is a resounding “YES! NOW!” There’s a halving coming up. It’s still almost a year away and non-bitcoin-advocate investors are just now starting to talk about it. In theory, the halving will necessarily drive up the price and value of Bitcoin. This isn’t necessarily the case but enough people are reading the writing on the wall that the value is probably going to keep rising as people try to buy in before the halving happens. Of course, the halving isn’t the only thing that impacts the price of Bitcoin, but right now it’s the biggest foreseeable market influencer.
From a Bitcoin-as-currency perspective, the short answer is always a resounding “YES! BUY AND HODL!” The true Bitcoin zealot doesn’t buy and sell based on bear markets and bull markets. They buy and if the price goes up it’s only a matter of time before it stabilizes and if the market goes down it’s only a matter of time before it goes up and then stabilizes.
Really, there’s not a bad time to buy Bitcoin. That’s largely because of its divisibility. If you can afford to buy a lot you might as well buy a lot. If you can’t afford to buy a lot, you don’t have to buy a lot.
That having been said, it is a really great time to buy, whether you’re an investor or an early adopter.
Disclaimer: The above references an opinion and is for information purposes only. It is not intended to be investment advice. Instead, use this article as backdrop for your own research and due diligence on investing in crypto.