When Bitcoin (CRYPTO:BTC) fell below $60,000 in early May, marking a two-month low. Crypto investors were understandably worried, especially given all the hoopla surrounding the Bitcoin halving that took place just two weeks prior. The feeling was not so much fear as disbelief: this shouldn’t be happening!

As the price of Bitcoin stabilized at the $65,000 level, some of this concern dissipated. But Bitcoin it is still 10% below its all-time high of $73,750 in mid-March. So is this recent drop in Bitcoin price a buying opportunity or not?

The Return of Bitcoin ETF Flows

Probably the launch of the new Spot Bitcoin exchange-traded funds (ETFs) in early January was the biggest factor driving Bitcoin to new highs this year. They attracted a massive flow of money from new investors for almost three months. Therefore, when investor flows into these ETFs began to slow down in late April and early May, it was a warning sign to the market about the future direction of Bitcoin’s price.

This is why the sudden return of investor flows into spot Bitcoin ETFs in mid-May is such a positive sign. The latest numbers are out now and it appears that money is once again flowing into Bitcoin ETFs. On May 15, Bitcoin ETFs reported their best daily inflow in nearly two weeks. Of course, this might just be a short-term problem.

But there is good reason to think that this is part of a long-term dynamic, in which investors decide to allocate a greater percentage of their portfolios to Bitcoin.

The arrival of new institutional investors

Almost at the same time that investor flows began to decline, Black stonethe issuer of the iShares Bitcoin Trust, suggested that a new wave of institutional investors would soon begin allocating a percentage of their portfolios to Bitcoin ETFs. BlackRock particularly highlighted pension funds, sovereign wealth funds and endowments as the most likely candidates to buy Bitcoin.

Image source: Getty Images.

At the time, it just seemed like a bunch of bluster, but it can’t be denied that several big-name institutional investors have recently announced large positions in the new Bitcoin ETFs. The latest name is the State of Wisconsin Investment Board (SWIB), which recently announced a $100 million investment in the iShares Bitcoin Trust. SWIB manages more than $156 billion in assets, including holdings of the Wisconsin Retirement System, the State Investment Fund and other state trust funds.

This is great news for Bitcoin because pension funds are very different animals from hedge funds. They have a fiduciary duty to protect the value of their investments and will not wade into the deep end of a dangerous shark-infested pool. So keep an eye out for similar types of traditionally risk-averse institutional investors putting their money into Bitcoin. Over time, continued purchases from these types of institutional investors should help drive up the price of Bitcoin.

The story continues

The long-term outlook for Bitcoin

Best of all, the long-term outlook for Bitcoin remains intact. Despite all the economic warning signs, Wall Street investment firm Bernstein has doubled its previous price forecast for Bitcoin. Bernstein expects a price of $100,000 for Bitcoin later this year and $150,000 by the end of 2025.

Furthermore, as Ark Invest’s Cathie Wood highlighted last November, Bitcoin is one of those rare assets that can perform well in both inflationary and deflationary environments. Bitcoin can be a robust risk-on asset when markets are advancing, as well as a strong risk-on asset when inflation and recession fears are rampant.

Ultimately, Bitcoin’s unique risk-reward profile is what makes it so attractive as a long-term investment. It has significant positive potential, also combined with a measure of protection against losses. For that reason, I’m not worried about the recent price drop. The current situation is a unique opportunity to buy Bitcoin while it is still undervalued.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.

Bitcoin is trading near 2-month lows. Is it a purchase? was originally published by The Motley Fool

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