The Bitcoin (CRYPTO: BTC) price is down 2.3% over the past 24 hours. One Bitcoin is currently worth US$56,612 (AU$74,489).
Bitcoin is still up 95% so far in 2021 but has now retraced 8% from the US$61,556 it reached on 14 February, according to data from CoinDesk.
Which has crypto enthusiasts and newbies alike wondering, is it time to buy the dip?
Timing your entry
For an answer to that question, we turn to Simon Peters who is a market analyst at eToro. The online trading and brokerage company bought Bitcoin for its own balance sheet. This happened more than 10 years ago when it was worth $5.
Now only the most bearish crypto analysts forecast the Bitcoin price will return to those bargain-basement levels. But the notoriously volatile digital token could certainly go lower from here.
Asked whether ASX investors should wait for a potentially bigger price fall before buying Bitcoin, Peters told the Motley Fool:
Timing the dip of any asset is both risky and difficult, as the price could fall further than the point where you think the bottom is. Ideally, the investor would need to have some knowledge of reading charts and using technical indicators to identify the bottom, or very close to the bottom of a dip or retracement.
Long-term investors, those planning to buy and hold, may find it easier to dollar cost average. Buying with a fixed amount each week or month, for example, regardless of what the price is. This strategy may not yield the highest returns versus buying at the bottom of a dip, it removes the complication of trying to time the market.
Can Bitcoin shine amid renewed inflation concerns?
Crack open the financial news and you’ll almost certainly run across several articles highlighting the potential risks of resurgent inflation to share markets.
You’ll likely also find at least 1 article from a prominent central banker attempting to allay those fears.
We don’t have a crystal ball. But the broad consensus is that whether inflation begins to impact interest rates and share markets this year or next, we can expect the erosion in the value of our fiat currencies to return.
But how about cryptocurrencies like Bitcoin? Can Bitcoin serve as an effective inflation hedge?
Here’s what eToro’s Peters told us:
Bitcoin has fulfilled the criteria of an inflation hedge, which is an asset that protects against the decreasing purchasing power of a domestic currency. More people are viewing it as such. This first happened with individual investors. Now we are starting to see corporations hold Bitcoin in their treasuries as an inflation hedge instead of cash.
Peters said he expects more investors will turn to Bitcoin as an inflation hedge. Especially if global governments and central banks continue their easy monetary and fiscal policy measures. That in turn, he said, should see the Bitcoin price keep rising.