Bitcoin crossed $120,000 this week for the first time, extending a rally that has added over $40,000 to the asset's price since January. The move is drawing in investors who sat out previous cycles — and raising familiar questions about whether this time is different.
The Three Engines Behind This Rally
1. Spot ETF inflows have been relentless. The Bitcoin spot ETFs launched by BlackRock, Fidelity, and others in early 2024 have now accumulated over $85 billion in assets. These products are pulling in money from retirement accounts, endowments, and wealth management firms that couldn't previously access crypto. Daily inflows have averaged $400-500 million through May.
2. The dollar is weakening. The trade war has had an unexpected side effect: it's eroding confidence in the dollar as the world's reserve currency. Several central banks have quietly reduced dollar holdings. Bitcoin, for all its volatility, is increasingly being discussed as a hedge against dollar debasement — similar to gold's traditional role.
3. The halving cycle is playing out. Bitcoin's April 2024 halving cut the daily supply of new coins in half. Historically, price appreciation has followed halving events with a 12-18 month lag — which puts us right in the expected window.
The Risks Remain Real
None of the fundamental risks of Bitcoin have disappeared:
- Regulatory crackdowns remain possible, especially in Europe
- Bitcoin has historically given back 70-80% of gains in bear markets
- Concentration risk: a small number of wallets hold a disproportionate share of supply
How Much Should You Own?
Most financial planners who accept crypto as a legitimate asset class suggest limiting exposure to 1-5% of a portfolio — enough to benefit from upside without catastrophic downside if the worst happens. At current prices, $120,000 per Bitcoin means you can get meaningful exposure with fractional purchases through most major exchanges or via the spot ETFs.
The worst mistake in crypto is FOMO-driven buying at peaks. If you don't already have a position, dollar-cost averaging over 3-6 months is a more disciplined entry than a lump sum today.