I haven’t written about cryptocurrency or Bitcoin in a while.
I think that’s primarily due to the fact that I’m having fewer and fewer conversations about crypto than I did a few years ago. I’m not getting very many Bitcoin questions, nor am I being served new content around it.
And I find that pretty interesting given the success of Bitcoin over the past year.
If you’re not a Bitcoin zealot whose first action each morning is to check the price, you may not know that the price of a single Bitcoin is all the way up to around $117,000.
Since its crushing 75% decline in 2022, when the price of Bitcoin dropped to $16,000, Bitcoin has rallied back to record a 600% gain since the beginning of 2023.
Bitcoin is up 105% in the last 12 months alone.
Bitcoin’s current market cap (the total dollar value of all available coins) is around $2.3 trillion. Meaning, if Bitcoin were a publicly traded company, it would rank as the 6th largest company in the world behind Amazon ($2.3 trillion) and just ahead of Meta ($1.9 trillion).
I saw a staggering stat the other day that speaks to the growing popularity of Bitcoin.
You can now buy Bitcoin ETFs through custodians like Charles Schwab and Fidelity, which are investment funds that allow investors to gain exposure to the price movements of Bitcoin without actually having to buy the coin.
In July, these Bitcoin ETFs took in $12.8 billion, marking the best month ever and a $600 million per day pace. As a group, these Bitcoin ETFs took in more money than any other single ETF did—even more than the biggest ETF in the world, VOO.
To try and put that in simpler terms, more money was put into Bitcoin in July than any single S&P 500 fund.
When Bitcoin first broke onto the scene, its avid believers proclaimed that crypto would change the world. They preached that it would overturn the traditional financial system, replace fiat currency, become a worldwide currency, eliminate inflation, and change our way of life forever.
None of that has happened.
There still really isn’t a use case for Bitcoin. It doesn’t do anything.
The same could be said for other asset classes that hold value, like gold or art. But you can still hang art in your house and admire it. And gold is at least a tangible asset that’s shiny.
But that hasn’t mattered. The price of Bitcoin has gone up anyway. The zealots have made a lot of money.
Enough people bought into the story and have put their hard-earned dollars behind it that it’s penetrated our culture. Those who have bought and held on for the wild ups and downs over the past decade have been rewarded with unbelievable gains.
I mean, if a meme-coin like Fartcoin can have a market cap of $1 billion, that tells you something about people’s willingness to put their money into an online currency.
Does this mean everyone needs to go out and buy some Bitcoin?
No. It all depends on your personal financial situation.
The issue with trying to figure out Bitcoin’s value as an investment is, as I mentioned, there still is no real use case for it. There is no underlying business that provides goods or services. There are no cash flows. There is no CEO or board that governs it. The price fluctuates seemingly on the whims of influential techies who decide it’s worth more today than yesterday.
In that sense, I would treat Bitcoin like any other speculative asset. If you want to add some Bitcoin to your investment portfolio, create some rules around it. Allocate a small portion of your overall portfolio so you don’t jeopardize your financial future by having your entire portfolio tied up in any single investment. Especially one as historically volatile as Bitcoin.
If Bitcoin happens to boom again, a little is all you’ll need. If it doesn’t, a little is all you’ll want.
All of this to say, I’m intrigued by this recent upswing. Which, at least from my point of view, hasn’t had a ton of fanfare. This current momentum feels a little less like an online craze and more like a trend. I wonder if Bitcoin is entering a new, more mature phase.
Who knows. Maybe I just jinxed it, and Bitcoin will drop 30% over the next week.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.