Should I Buy Bitcoin for $25,000?

As we enter the final days of summer, we may be on the verge of an outbreak of Bitcoin (BTC -1.09%). On August 14, Bitcoin briefly traded above $25,000 for the first time since June. Understandably, this has Bitcoin bulls excited because all the talk of “buying the dip” over the summer looks like it’s actually working. After nearly two months of testing the $20,000 resistance level, it now looks like Bitcoin may be ready for its next big test: $25,000.

So Should You Buy Bitcoin For $25,000? There are two important factors to keep in mind here. One is the general psychology of the market. The second is the presence of important catalysts that could be in line for sustained, long-term growth in the price of Bitcoin. Let’s take a closer look at both of these two key factors.

The psychology of the market

Crypto markets, much more than stock markets, are based on a mixture of gut feelings, emotions and instincts. Sometimes you can just “feel” that the market is going higher. Combine all this and you get what the British economist John Maynard Keynes famously described as “animal spirits”. This was his way of explaining how the markets moved up and down in times of uncertainty. It can be tempting to describe the markets in rational, data-driven ways, but when it comes down to it, human emotions matter. And right now, the animal spirits of the bulls are starting to re-emerge after a brief hibernation during the so-called “crypto winter” of the past few months.

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Image source: Getty Images.

To see all this play out in the crypto markets, it’s easiest to think in terms of resistance levels, which are simply important price targets. If a crypto can hit one price target, confidence and optimism builds that it can hit another price target, and then another price target, and at some point you’re off to the races. And that’s what we can see now with Bitcoin, which has been testing the psychologically important $20,000 price point all summer. In short, it looked like the Bitcoin bulls were going to capitulate, but not anymore. $25,000 is the new $20,000. And $30,000 will be the new $25,000. The longer you wait, the harder it will be to get into an attractive entry point.

Here come the institutional investors

But wait, it gets better. That’s because there is a rational, real economic factor that also has the potential to push Bitcoin higher. And that is the arrival of institutional money in the crypto market. Large pension funds, endowments and foundations are just itching to put some of their capital to work in the crypto markets. We see that clearly with the agreement at the beginning of August between Black stone (BLK -4.21%) and Coin base (COIN -11.27%), where BlackRock institutional and private wealth clients will now have access to Coinbase crypto products and services via Aladdin’s wealth management platform. This is hugely important because BlackRock is the largest asset manager in the world, with over $10 trillion in assets under management.

And BlackRock did not rest there. Within days of announcing the Coinbase deal, it also announced it was rolling out a private Bitcoin trust for its wealthiest US customers. The company also gave what can only be interpreted as a bullish endorsement for Bitcoin: “Bitcoin is the oldest, largest and most liquid crypto-asset and is currently our clients’ primary topic of interest in the crypto-asset space.” Boo-yeah! Add in the fact that Fidelity Investments is now making it easier than ever to invest your 401(k) plan in Bitcoin, and there are very strong signs that the next phase of Bitcoin’s growth could be led by large, institutional investors.

A September to remember

This could end up being a September to remember. Bitcoin has lagged behind Ethereum (ETH -4.86%) much of the summer, primarily because crypto investors targeted The Merge and allocated their money primarily to Ethereum. The merger, which is a massive technological upgrade for Ethereum, is now scheduled to take place on September 15th. After that date, we could see a return to the traditional situation in the crypto markets: Bitcoin being the center of attention for investors, and Ethereum being a secondary option. This too will cause more money to flow into Bitcoin.

Sure, The Merge might end up as a nothing burger. And, yes, the price of Bitcoin could just as easily go to $10,000 as $40,000. But September could also be the start of another long, sustained rally in crypto where Bitcoin will play a big role.