Should You Buy Bitcoin While It's Under $120,000?

Key Points

• Bitcoin is benefiting from institutional acceptance and fewer federal regulations for cryptocurrencies.

• The coin's price could fall if the economy slows down significantly.

• Bitcoin could still be a good long-term investment, but investors should be prepared for large price swings.

• 10 stocks we like better than Bitcoin ›

Cryptocurrency prices have surged over the past year. The federal government has taken a softer approach toward regulation, and investors have become optimistic (and a little speculative) about investments. The price of Bitcoin (CRYPTO: BTC) has risen as well, skyrocketing 76% over the past year alone.

There's a general sense of optimism among investors with both stocks and cryptocurrencies, but if tougher economic times are ahead, some of the large returns they've experienced could experience a reversal. Bitcoin has proved to be a resilient cryptocurrency in the past, bouncing back after significant pullbacks. Is it worth buying Bitcoin while it's still under $120,000? Here's what investors should know.

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Why Bitcoin's price continues to climb

Bitcoin began its most recent ascent after President Trump was elected to office late last year. The initial bump likely came as crypto investors anticipated that the Trump administration would be more favorable toward cryptocurrencies.

They weren't wrong. Since taking office, Trump has rolled back regulations on cryptocurrencies, announced a strategic Bitcoin reserve, dropped some lawsuits against cryptocurrency companies, and even launched his own meme coin. While these developments aren't necessarily good things, they have contributed to the rise in crypto prices, including Bitcoin's.

More importantly, Bitcoin has gained momentum as the coin has received wider institutional acceptance. Nearly a dozen spot Bitcoin exchange-traded funds (ETFs) have been launched over the past year, allowing investors an easy way to invest in Bitcoin's price changes. With large financial institutions now selling shares in Bitcoin ETFs, Bitcoin has a new level of credibility in the investment world.

Why Bitcoin could pull back soon

With its massive price gains of about 76% over the past year, there are some concerns that Bitcoin (and cryptocurrencies in general) is currently a bit frothy. For one, investors have been pushing Bitcoin higher as part of a general optimism in most investments, including the stock market, as the economy has shown resilience over the past few years.

But there have been some recent signs that the economy may be slowing. Revised hiring figures for May and June were much lower than previously thought, and July's hiring was slower than expected as well.

Many economists are also worried that the impact of Trump's tariffs could eventually be felt by consumers if more companies begin passing on the additional costs to customers. If that happens, consumer spending could slow down at the same time as companies are slowing hiring. The combination of those two things could slow the economy's growth and, in turn, cause investors to move away from riskier investments like Bitcoin.

Is now a good time to buy Bitcoin?

I think it's fine to invest in Bitcoin right now only if your portfolio can handle significant volatility and you're willing to hold on to the cryptocurrency for years (instead of just weeks or months).

With Bitcoin's price surging so quickly over the past year, it could be primed for a dramatic pullback if we get some really negative economic data. Cryptocurrencies are prone to dramatic price swings, so another bad jobs report, rising inflation, or ongoing tariff news could cause Bitcoin's value to decline quickly.

But if you don't mind the risk, Bitcoin could still end up being a good crypto to hold for the long term. Its acceptance by many financial institutions and the launch of Bitcoin ETFs have made it easier than ever to invest in Bitcoin's price movements, and that could help bolster Bitcoin's acceptance among investors for years to come -- even if there are some big price swings along the way.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.