Investors continually grapple with the ageless question of whether to buy Bitcoin (CRYPTO: BTC). While the cryptocurrency is about 15% off its all-time high today, it's returned over 10,000% over the past decade, so buying and holding has generally worked well.

But the ride has proven bumpy, and Bitcoin aggressively sold off a few days ago when enough fear hit Wall Street to produce the market's worst single-day performance since the pandemic in 2020.

In other words, the question of whether investors should buy Bitcoin while it's under $65,000 doesn't have a simple answer.

Instead, think about the big picture. It turns out the answer is clear once you start asking the right questions.

Bitcoin is a better long-term investment than ever

First, investors should always consider why they might buy Bitcoin. Bitcoin's primary investment thesis is that it's a hedge against the U.S. dollar. As America borrows more money and puts more dollars into circulation, the buying power of a single dollar decreases. That's jargon to describe inflation, where buying the same goods or services takes more dollars over time.

Bitcoin is decentralized and has a fixed supply of 21 million bitcoins. The idea behind investing in Bitcoin is that as long-term demand for Bitcoin grows against its fixed supply, the price in U.S. dollars will increase. This has played out thus far; Bitcoin's price (in dollars) has appreciated much faster than the broader stock market.

No, you can't go to most stores today and pay for things with Bitcoin. However, more merchants than ever are accepting Bitcoin as payment. Some corporations have begun holding Bitcoin on their balance sheets as an alternative to cash. You heard nary a peep about Bitcoin during the last election cycle, but this time, former President Donald Trump is campaigning on it. Vice President Kamala Harris, generally anti-crypto under the Biden administration, is reportedly pivoting to keeping an open mind.

All this points to Bitcoin's gradual acceptance in society, which bodes well for its long-term demand (and price).

But investors should be careful right now

Again, nobody can time the market's ups and downs. However, there are conditions for increased stock market volatility. Recent economic data points to a potential looming recession after these past few years of high interest rates. Consumer-facing blue chip companies like McDonald's and Hershey have warned that consumers are pulling back spending. Consumers drive two-thirds of the U.S. economy.

Investors should also consider the possibility of volatility. Historically, Bitcoin's price has dropped with the S&P 500 index:

The last thing you want to do is make a lump sum investment in Bitcoin only to see the price plummet. Hopefully, Bitcoin won't always be so volatile, but there have been numerous 60% declines over the past decade, so investors should hope for better but prepare for the worst.

Here is the smartest way to invest in Bitcoin

Investors won't win the volatility game. The best way to invest in Bitcoin is methodically and slowly over time. You may have heard of dollar-cost averaging, where you invest in an asset slowly over time, making small, scheduled purchases. If Bitcoin's price increases, you'll be happy you got your feet wet. If the price falls, you'll happily average down as the price declines.

Dollar-cost averaging means you'll never time the absolute bottom, but it also guarantees you won't buy all of an investment at the worst time.

So rather than trying to figure out whether Bitcoin is worth buying at $65,000, $50,000, or $100,000, ask yourself whether the reason you want to own Bitcoin is still valid. If so, focus on a plan to buy and hold it, not what the price might do in the short term. And, of course, Bitcoin's volatility means investors should  include it only in a diversified portfolio to minimize their risk.

Should you invest $1,000 in Bitcoin right now?

Before you buy stock in Bitcoin, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $615,516!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 6, 2024

Justin Pope has positions in Hershey. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Hershey. The Motley Fool has a disclosure policy.

Should You Buy Bitcoin While It's Less Than $65,000? was originally published by The Motley Fool