Is it Too Late to Buy Bitcoin?

Missing the Boat on Bitcoin

Surveying a representative sample of 2,000 savers in the UK, the Parliament Street survey found that 30% of them “will not invest in cryptocurrency because they feel they have ‘missed the boat’.”

Personal experience has also taught this author that such a belief in ‘missing the boat’ is relatively common, yet we can flip the 30% figure and suggest 70% don’t feel they’ve missed an opportunity to profit from crypto. In fact, Parliament Street’s survey also found that 31% of investors believe bitcoin will hit a high of £50,000 (c. $68,500) in 2021, a figure which is particularly impressive insofar as responses were likely taken in February. 18% even went so far as to predict a 2021 high of £100,000 (c. $137,193).

So the mood among the general public is actually pretty good, although it’s worth addressing the ‘missed the boat’ idea directly.

To begin with, it’s possible that, even with its impressive gains, the current bull market is only just getting started.

Optimistic, yes, but as GlobalData wrote in a report at the end of February, banks and other financial institutions are only just beginning to get involved in bitcoin. The USA’s oldest bank, BNY Mellon, set up a crypto unit in February, giving its clients the opportunity to buy and store cryptocurrencies. Likewise, it was revealed in March that Morgan Stanley is to become the first big bank in the States to offer its wealth clients access to bitcoin funds.

These represent some of the first forays into bitcoin of the biggest banks in America, with the likes of Goldman Sachs, JPMorgan and Bank of America yet to take the plunge. What this means is that their clients — large investors and institutional customers — have only just secured the chance to buy crypto. In other words, most institutions are yet to dip their toes into bitcoin, even though the few institutions who have involved themselves have largely been responsible for driving the current bull market.

Better than Cash, Better than the Stock Market

But let’s play Devil’s advocate for a while. Assuming that a bigger wave of new institutions isn’t going to flood into the bitcoin market, it could still offer bigger gains than keeping your money in cash, or even investing in shares.

To be very unambitious, with the Federal Reserve base rate at 0.07%, bitcoin would simply need to exceed this very small percentage to outperform cash. And with the S&P 500 offering an annual return of 16.26% in 2020, and nothing above 30% over the past 20 years, bitcoin also has an extremely good chance of outperforming the stock market and by extension most stocks.

Indeed, bitcoin has offered far superior gains in all but two years of existence, with the past eight years (and a quarter) shown below:

• 2013: 3,386%

• 2014: -59%

• 2015: 38.7%

• 2016: 123.7%

• 2017: 1,351%

• 2018: -73.8%

• 2019: 94.9%

• 2020: 303.4%

• 2021 (so far): 78.5%

When bitcoin rises, it rises substantially, far outstripping other assets. Of course, cautious investors might point to the fact that it suffered drops in 2014 and 2018. But this doesn’t prove that any would-be investor has missed the boat on the current bitcoin rally, only that you need to adopt a longer term strategy if you want a more secure shot at earning money.

According to data from barchart.com, bitcoin is up by the following amounts over various timeframes:

• 10 years: 99,999%

• 5 years: 12,794%

• 3 years: 685.9%

• 2 years: 1,216%

Put simply, if you buy bitcoin and hold it for several years, the cryptocurrency’s price history indicates that you have a better chance of enjoying an outsized return. Or to rephrase in terms of this article’s title, you haven’t missed the boat with bitcoin so long as you’re prepared to sit tight for two or three years (or more).

Newer Cryptocurrencies

The above suggests that patient bitcoin investors can still gain (far) in excess of what they might get from stocks and cash. However, assuming you aren’t particularly patient, you may have missed out on bitcoin as far as the 2020/21 rally is concerned. That said, there are other cryptocurrencies which may offer the kind of large short-term gains impatient investors are after.

This includes newer altcoins such as Chainlink, Polkadot, Theta and Terra, the latter two of which have risen by over 10,000% in the past year, even with the dip in prices that has occurred in the past few days (as of March 25). And it will likely include other cryptocurrencies that will emerge in the future, bringing with them new use cases and functions.

Of course, younger cryptocurrencies will always be a riskier bet than bitcoin. But as any seasoned investor will know, risk and reward tend to form an inextricable couple. The history of bitcoin teaches us just as much, and it will likely teach us that in the coming years as well, despite the growing feeling that many of us have missed its boat.