What’s Fueling the Bitcoin Rally?
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What recent price milestone has Bitcoin reached and why does it matter?
Here's your money briefing for Friday, March 8th. I'm J.R. Whelan for The Wall Street Journal. The price of Bitcoin is hovering near new record highs, three years after collapsing and losing more than 50% of its value.
People who invest in Bitcoin particularly tend to be long-term believers in it. And so while everyone is really excited that it hit a new record for the first time since 2021, a lot of people expect that it could go even higher. But we've also spoken to people who are much more cautious.
Kaitlin Ostroff covers digital currencies for the WSJ. We'll talk to her about the current Bitcoin rally and what could move the price going forward after the break.
The recent run-up in the price of Bitcoin has left some investors with mixed feelings about their holdings.
How did Bitcoin's price history and 2021 collapse set the stage for today's rally?
Wall Street Journal reporter Caitlin Ostroff joins me. Caitlin, what has pushed Bitcoin's price to the record highs we've seen this week?
It seems in part that Bitcoin's run up is due to excitement over the approval of exchange traded funds that hold Bitcoin. ETFs have gotten very popular in recent years for a number of assets, including stocks and bonds. They wind up being very cheap for people to buy into and also very accessible because anyone with a retirement account also has a brokerage account. And therefore, they have an easy way to kind of plug in a ticker and buy and sell whatever they want to. Like how they would a stock or like some other fund that they wanted to add to their investments. And a lot of the hype about that was that this could expand the base of Bitcoin investors because you wouldn't have to go on Coinbase, one of the U.S.
exchanges, give them your name, your passport, go through all of the compliance, and then go buy Bitcoin and hold that yourself. You could just kind of do it where you do all of your other investments.
UN reporter Joe Pinsker spoke to some people who have invested in and held Bitcoin for several years. What kind of a roller coaster ride has that been?
For the true believers, a lot of them didn't blink. They went, I really believe in Bitcoin. It's going to go back up. And for some people, they were like, oh God, did I bet on the wrong horse? Bitcoin market having crashed to, you know, just a bit over $15,000 at one point in the last like two years, it has fluctuated wildly. And I, you know, you don't buy crypto unless you're comfortable with some degree of risk.
How much cryptocurrency do financial advisors suggest that people have in their portfolio, if any?
It obviously depends on the person, but financial advisors usually advise you to keep a very small percentage, probably under 3% in your portfolio. And obviously don't put in more money than you can afford to lose. You kind of have to operate on the assumption that Bitcoin could crash again because it's crashed many times through its history. And so, you know, just kind of be cautious.
What of the investors you spoke with say they plan to do with their Bitcoin investments in light of it reaching new records?
Largely, they plan to hold. People who invest in Bitcoin particularly tend to be long-term believers in it. And so while everyone is really excited that it hit a new record for the first time since 2021, a lot of people expect that it could go even higher. But we've also spoken to people who are much more cautious and because of Bitcoin's volatility have basically said they may have traded in the past, but they're not going to get back in.
For people who have held Bitcoin, how should they review their wider portfolios given these record levels?
The thing with Bitcoin is, so if you sit there and say, I only want 2% or 3% of my portfolio to be in Bitcoin, that is a great idea, but that's not always very easily managed because the price moves so much so quickly that you basically have to actively be buying or selling in order to maintain the same proportion that you want. And so it's really a matter of you have to keep kind of a laser focus on, you know, if Bitcoin surges $10,000, $20,000,
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