Bitcoin Just Hit an All-Time High, but Is the Cryptocurrency a Buy?

What a year it's been for Bitcoin (CRYPTO: BTC) so far. The world's top cryptocurrency hit an all-time high of $109,000 in January and then fell to as low as $75,000 in April. Now, it has recovered and just hit a new all-time high of $112,000 on May 22.

Unsurprisingly, many investors are confused about where Bitcoin is headed next. Will it continue to soar higher? Or is it overvalued, and ready for another market correction?

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Is Bitcoin a tech stock or "digital gold"?

One reason for all this confusion is that investors don't really know what to make of Bitcoin. Cryptocurrency is confusing enough, and Bitcoin doesn't make it any easier.

At times, Bitcoin appears to behave like a high-risk, high-reward tech stock. It currently has a market cap of $2.2 trillion, which is nearly identical to the market caps of Alphabet and Amazon.

At other times, though, Bitcoin appears to act like a potential hedge against macroeconomic uncertainty, just like gold. As a result, some investors have started to view Bitcoin as a potential safe haven asset.

Image source: Getty Images.

The ongoing tariff drama has made this dual nature of Bitcoin very obvious. As soon as President Donald Trump announced sweeping, across-the-board tariffs on April 2, Bitcoin sold off, as did most tech stocks.

But as Bitcoin began to stabilize, it soon became fashionable to talk about it as "digital gold." In other words, investors started to view Bitcoin -- a digital asset largely unaffected by global trade flows -- as a potential hedge against tariff uncertainty.

And that's exactly when Bitcoin began to decouple from the tech market. Tech stocks were still falling, but Bitcoin was rising in value. The "digital gold" investment thesis seemed to make sense. It was obvious that tech companies with significant overseas operations were going to get hit hard by tariffs, but maybe Bitcoin wouldn't.

The problem is that you can't have it both ways. Bitcoin can't be both a tech stock and "digital gold," can it? Something just doesn't add up. If markets are bullish, then Bitcoin trades like a tech stock? But if markets are bearish, Bitcoin suddenly undergoes a transformation and trades like gold? To me, that argument sounds a lot like, "Heads I win, tails you lose."

Bitcoin's upside potential

Interestingly, analysts and investors are starting to present different price forecasts for Bitcoin, based on how they view this asset.

In one scenario, Bitcoin trades like a tech stock and is capable of high future returns. This is the Bitcoin we know and love -- the type of digital asset that turned in triple-digit returns in 2023 and 2024, and that has regularly been the top-performing asset in the world.

In another scenario, though, Bitcoin trades like gold. It loses some of its characteristic volatility, but it also loses some of its upside potential. Remember: On Wall Street, there's no such thing as a free lunch. You can't have both high upside and low risk at the same time.

In late April, investment firm 21Shares issued a report called "From Digital Asset to Safe Haven: Why Is Bitcoin Acting Like Gold?" It suggested that Bitcoin would continue to narrow the performance gap with gold over the remainder of 2025. If you buy into the argument that "digital gold" should perform similarly to physical gold, this makes a lot of sense.

But guess what? That thesis also implies that Bitcoin is no longer a digital asset capable of massive, triple-digit returns. Just look at the historical returns for gold. Over the past 15 years, the single best year for gold was 2010, when it returned 27.7%. But the annualized returns for gold are usually much less impressive. They are typically around 10% (over the past 10 or 20 years).

Tariff uncertainty is the wild card factor

The wild card factor in all this, of course, is tariffs. On May 23, just one day after Bitcoin hit its all-time high of $112,000, President Trump threw sand into the gears of the crypto market. He suggested that 50% tariffs on Europe were incoming. He also suggested that tech companies such as Apple refusing to move operations back to the United States might be facing additional tariffs.

As soon as this news came out, Bitcoin immediately declined to $109,000. So, wait, is Bitcoin now a tech stock? It remains to be seen what happens next. But things just got confusing again (President Trump has already delayed the 50% tariffs on Europe).

That's the risk of investing in Bitcoin. For short periods, it can behave like "digital gold." But, most of the time, it behaves much more like a high-risk, high-reward tech stock. If you're thinking about investing in Bitcoin now, you need to be comfortable with where you think the tech market is headed in 2025.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Dominic Basulto has positions in Amazon and Bitcoin. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Bitcoin. The Motley Fool has a disclosure policy.