Amid the current climate of uncertainty and fluctuations in global tariffs, it’s no surprise that many investors may be hesitant to dive into the cryptocurrency market. Cryptocurrencies, much like traditional stocks, have taken a hit, with some experiencing declines of up to 50% this year. However, there’s one cryptocurrency that may be worth considering for long-term investment: Bitcoin (BTC -6.59%). Here’s why it could be a beneficial addition to your portfolio.
Bitcoin’s Remarkable Resilience
One of the most compelling arguments in favor of investing in Bitcoin is its impressive ability to recover from downturns. Over the past 15 years, Bitcoin has faced numerous cycles of rapid growth followed by sharp declines, a characteristic that has made it notorious for its volatility. The notable aspect here is that after each significant drop, Bitcoin has managed to bounce back, often reaching new all-time highs. While some might speculate about a challenging year ahead for Bitcoin in 2025, examining historical trends reveals a pattern of recovery. Key years to reference include 2014, when Bitcoin dropped by 57%; 2018, which saw a staggering 74% fall; and 2022, with a decline of 64%. In each instance, Bitcoin eventually surged to unprecedented heights. For instance, after hitting a peak of $69,000 in November 2021, Bitcoin fell below $16,000 in November 2022, only to rebound with remarkable triple-digit percentage gains in 2023 and 2024, ultimately reaching a staggering $109,000 in January. While past performance cannot guarantee future results, the historical tendency for Bitcoin to recover from major setbacks may offer reassurance during times of tariff-induced anxiety.
Bitcoin: The Dual Nature of Performance
In a recent analysis conducted by WisdomTree (WT -6.86%), Bitcoin’s performance was compared to eight different asset classes over the span of 2012 to 2023. The findings were striking: Bitcoin emerged as the best-performing asset in nine out of twelve years examined. However, in the remaining three years—2014, 2018, and 2022—it ranked as the worst performer by a wide margin. This volatile nature of Bitcoin can be likened to the character Ricky Bobby from the film “Talladega Nights,” who famously said, “If you ain’t first, you’re last.” This highlights Bitcoin’s extreme highs and lows, as it can soar to the top one year and then plummet the next. Investors must be prepared for this rollercoaster experience; while there may be years of exceptional gains, there are also years that could lead to significant losses. Currently, Bitcoin has seen a nearly 25% decrease from its all-time high of $109,000 in January, showing little indication of a quick recovery.
Adopting a Long-Term Perspective
For those considering an investment in Bitcoin, adopting a long-term perspective is crucial. Cathie Wood of Ark Invest emphasizes the importance of being prepared to hold on to Bitcoin for several years to maximize returns. Viewing Bitcoin merely as a short-term investment strategy could lead to disappointment. In Ark Invest’s “Big Ideas 2024” report, Wood illustrated how Bitcoin has consistently outperformed major asset classes over extended time frames. Over a seven-year period, Bitcoin delivered an average annualized return of 44%, while other significant asset classes averaged only 5.7%. Furthermore, the longer the investment horizon, the better the performance: an investor who maintained their Bitcoin holdings for seven years could expect an annualized return of around 70%, compared to 55% for a four-year hold.
Bitcoin’s Mainstream Adoption
Another significant factor contributing to Bitcoin’s potential is its increasing acceptance in mainstream finance. The introduction of new spot Bitcoin ETFs in January 2024 has played a pivotal role in this shift. These ETFs have made Bitcoin accessible to hedge fund managers, institutional investors, and everyday individuals familiar with exchange-traded funds, simplifying the purchasing process to be akin to buying shares in a tech company. The result has been a substantial influx of over $100 billion into these ETFs. Additionally, the current administration has prioritized cryptocurrency, taking measures to enhance Bitcoin’s future outlook by establishing a Strategic Bitcoin Reserve. Any future acquisitions of Bitcoin by the U.S. government could have a monumental impact on its market price. Considering these developments, Bitcoin may indeed be the top cryptocurrency to buy and hold for the long term. However, investors should remain prepared for a potentially tumultuous journey ahead.
