As Bitcoin Surpasses $100,000, Is the Major Cryptocurrency a Buy, Sell, or Hold?

With Bitcoin (CRYPTO: BTC) trending above $104,000 as of May 13, the debate over whether to buy or sell the world's top cryptocurrency is as vibrant as ever. With a highly uncertain cocktail of economic, political, regulatory, supply, and social factors, this coin is being buffeted by headwinds, tailwinds, and crosswinds from practically every angle, and even as some of those subside, others are blowing harder.

But there are a few main narratives for both bears and bulls. Let's examine those in closer detail so that you will have a compass for your own investments during this turbulence.

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Why someone might want to sell

The main argument for selling Bitcoin right now is that its price is unsustainably high given the bearish macroeconomic picture in the U.S. This is the result of the ongoing global trade tension, as the U.S. considers implementing wide-ranging tariffs on almost every country, including the country's most important trading partners.

Such a trade war is very likely to harm the economy by imposing higher costs on businesses, which will then pass their higher costs to consumers, thereby reducing the supply of investment dollars. With investment funding constrained and businesses shrinking due to lower demand as a result of higher costs, riskier investments, like Bitcoin as well as other cryptocurrencies, would be heavily disfavored. Furthermore, so this line of reasoning goes, at least some holders of Bitcoin would likely need to liquidate some of their investments to cover their expenses, especially if the trade war leads to a sharp recession as some predict.

Image source: Getty Images.

Another element of the sell thesis is that these bearish headwinds are happening precisely when the price of Bitcoin is, in their view, overextended due to the recent gains. Thus the downside risk to holders might be even larger than what's implied by the trade war alone. The bears may have a point there because the coin's price is up by 66% during the past 12 months, which many would suggest is a harbinger for a painful reversion to the mean.

The case for buying and holding is quite strong

The bull thesis for buying or holding Bitcoin is stronger than the bear case because it's both longer-term in its logic as well as being of at least equal strength regarding the coin's prospects in the short and medium terms. In the near term, Bitcoin is going to continue to accrue catalysts from new government policies and new regulations in the U.S. and elsewhere, all of which are occurring alongside widespread adoption of the asset in the financial industry at larger scales than ever before.

For instance, the Strategic Bitcoin Reserve has yet to be implemented, but if it is, it would require the U.S. government to retain its coins rather than sell them at auction, which would decrease the float available for public trading and put upward pressure on its price, potentially for many years. At the same time, other countries are considering forming similar reserves, which represents both a new set of potential catalysts as well as further constraints on supply. And exchange-traded funds (ETFs) holding Bitcoin are becoming increasingly popular, as are Bitcoin treasury companies, which are just starting to take off as a new type of business devoted solely to holding the crypto.

Over the long term, Bitcoin's halving schedule ensures that less and less of it will be available to purchase relative to before. Because supply is capped at 21 million coins, buyers will need to compete more aggressively to secure enough coins for their preferred holding of the asset, driving prices upward. Those rising prices will also attract new investors, a growing pool of potential buyers who can swoop in to take advantage of any dips.

Buying Bitcoin or retaining what you currently have are thus better moves than selling or remaining sidelined. The current set of catalysts that are on the table right now will eventually be exhausted, leaving the coin's highly favorable long-term supply dynamics to drive prices. In contrast, even if the trade war inflicts a lot of damage on the economy for years and years, and it might, it probably won't detract from Bitcoin's ever-increasing scarcity, though it could certainly hammer the price a lot in the short term.

With that in mind, there's no need to rush into a big position. Set up a dollar-cost averaging (DCA) strategy with your broker, and slowly accumulate the coin. If you can hold it for five years or more, you'll have plenty of exposure to its upside, and hopefully enough time for bumps in the road to be smoothed out by growth.

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Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.