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TEMPO.CO, Jakarta - Following a remarkable 150% rally in 2024, should you invest in Bitcoin this year? The top cryptocurrency has arguably shown significant growth over the past few years, rising to over $100,000. With a hopeful thrust from the president-elect of the United States, Donald Trump, investors are putting more faith in this investment vehicle.
However, in order to avoid financially alarming occurrences, advisors and analysts have shared their insights on the potential value of Bitcoin. Let’s learn more about the forecasted nature of the favored cryptocurrency market as highlighted by Investopedia, Forbes, and Euronews below.
Should You Invest in Bitcoin?
Much like other cryptocurrency markets, Bitcoin is an extremely volatile asset that could turn its holders’ world upside down overnight. That’s why wise investment is always encouraged amidst the rising enthusiasm.
Citing from Investopedia, asset manager Blackrock suggested that a 1-2% Bitcoin allocation is a reasonable portfolio investment. If there is a market leap in the future, that figure will still add value to the entire portfolio. Conversely, if Bitcoin loses its grip, a one or two-percent exposure will not fully wipe out the holdings.
Despite the cautious alert, Forbes mentioned the price projection of Bitcoin in 2025, with predictions varying from US$75,000 to US$250,000 in a moderate enterprise. There is also a likelihood of Bitcoin reaching a high estimation of US$100,000,000 in price if institutional adoption, macroeconomic trends, and regulatory changes are imposed.
By design, Bitcoin comes with a fixed supply and is limited to 21 million coins in circulation, throwing the market into the dynamics of supply and demand at large. Currently, 19.79 million of them are circulating in the market.
Historically, Bitcoin has a four-year cycle of halving, with inevitable ups and downs. According to Euronews, the past two cycles since 2017 experienced surges of 2,300% and 1,700%, followed by declines ranging from 70% to 80%. If the cycle remains upheld, any sort of changes are due in 2025.
The U.S. Regulatory Momentum
In early December 2024, Bitcoin surpassed US$100,000 for the first time, driven by the anticipation that the election of Republican Donald Trump as U.S. president would foster a cryptocurrency-friendly regulatory environment under his administration.
During his campaign, Trump expressed a positive stance on digital assets, pledging to make the United States the "crypto capital of the planet" and to create a national bitcoin reserve.
Bitcoin Taxation
The IRS, or Internal Revenue Service, classifies cryptocurrency as property, similar to stocks, real estate, or bonds. This means that investors are required to pay taxes on any gains from cryptocurrency transactions, including earning, trading, selling, or using it as a form of payment.
Selling Bitcoin (BTC) for fiat currency, such as USD, is considered a taxable event as it results in either gains or losses. Tax liability, however, is influenced by factors like the amount of profit, the duration the asset was held, and the investor's tax bracket.
Exchanging one cryptocurrency for another also triggers tax obligations. For example, selling Bitcoin to purchase Ethereum is considered a taxable transaction by the IRS.
The question of "Should you invest in Bitcoin?" ultimately depends on your financial goals, risk tolerance, and understanding of the cryptocurrency market. While Bitcoin has shown remarkable growth, including a 150% rally in 2024, its volatile nature calls for careful consideration. To better understand the nature of cryptocurrency, let's also learn about the reasons behind Bitcoin's volatility here.
Editor’s Choice: Bitcoin Surges Above $106,000 on Strategic Reserve Hopes
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