Bitcoin Is Down 53%. Is It Finally Time to Buy?

Not all that long ago, Bitcoin (CRYPTO: BTC) had the wind in its sails. The cryptocurrency reached an all-time high of $126,210 in October of last year, but has since plunged 53%.

There isn't one simple answer for the sell-off, but what's clear is that investors have headed for the exits, in search of better places to put their money. The big question is whether Bitcoin will follow its past pattern of mass sell-offs, only to regain ground and surpass previous highs.

Here's what's happening with Bitcoin and why it might be a good time to start a small position, if you're willing to ride out more volatility.

Image source: Getty Images.

Many investors have lost faith in Bitcoin

Many factors are converging at once, causing investors to lose faith in Bitcoin. High interest rates, significant outflows from Bitcoin ETFs, geopolitical instability, and recent selling of the crypto by major Bitcoin holder Strategy are all contributors.

Then there's the shift toward artificial intelligence. Once technology companies turned their attention toward AI -- with many experiencing soaring sales and earnings -- many people realized tech companies could earn huge returns and offer more attractive places to put their money than cryptocurrencies.

But hardcore Bitcoin believers still exist. Cathie Wood's Ark Investment Management thinks Bitcoin could be worth about $750,000 by 2030. VanEck's head of digital assets research, Matthew Sigel, recently said that the cryptocurrency could reach $1 million in the next few years, and Strategy's management says the value of one Bitcoin could be $21 million by 2045.

Those are all just estimates, of course, and each Bitcoin bull has their own methodology for reaching such high Bitcoin price conclusions.

However, one thing that's missing from those narratives is that Bitcoin doesn't have to come anywhere close to those price estimates to make investors money.

Why now could be a good time to start a small Bitcoin position

There's no doubt that there has been a lot of volatility for Bitcoin's price, and there will likely continue to be. This isn't anything new for Bitcoin. Its value has fluctuated wildly many times before, as the chart of Bitcoin's value over the past 10 years shows.

Image source: Bitcoin Price data by YCharts.

The peaks and troughs in this chart represent a range of positive and negative catalysts for Bitcoin, but what's clear is that even after huge sell-offs, Bitcoin has made significant value gains. Despite its volatility, Bitcoin is still up 67% over the past five years.

The one thing that hasn't changed about Bitcoin amid these price swings is that there's still a limited supply -- capped at 21 million coins -- and that scarcity typically makes investors buy up Bitcoin after big sell-offs.

When you pair that scarcity idea with other potential catalysts, such as lower interest rates, a booming economy, and more institutional investor acceptance, Bitcoin's value could start moving higher again in the near future.

There's no guarantee of that happening, but the above chart shows that past declines have usually been followed by price increases for the cryptocurrency. If you can stomach some intense volatility and believe the inherent scarcity of Bitcoin gives it some level of value, taking advantage of its relatively low price right now might be a smart move.

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.