(Photo: Jürg Kradolfer via Unsplash)

The price of Bitcoin (CRYPTO: BTC) traded back up to above $38,000 on Tuesday, but it remains down more than 41% from its all-time high of $64,789 in April.

Bitcoin bulls are urging investors to buy the dip in the popular cryptocurrency, but DataTrek Research co-founder Nicholas Colas said Tuesday that at least one metric suggests it may be too early to be scooping up Bitcoin just yet.

Bitcoin Vs. Altcoins: The chart below highlights Bitcoin’s percentage of the total global cryptocurrency market cap. Colas said Bitcoin’s price has historically had a strong negative correlation to its share of the total crypto market. In other words, the worst cryptocurrencies perform as an investment, the better Bitcoin’s price performs relative to other cryptos.

Colas said currency traders often observe a similar pattern in the value of the U.S. dollar, which tends to outperform during periods in which investors are worried about the market.

(Click on image to enlarge)

“The low points for [Bitcoin’s] share of the online virtual currency space (mid-2017, early 2018, and again in mid-May 2021) coincide with at least fast rising if not absolute highs in price,” Colas said.

Bitcoin’s share of the total crypto market was above 60% for most of the past 2 1/2 years. However, it has recently dropped to just 46.5%, its lowest point since the previous crypto bubble in early 2018.

“By this heuristic, it is still too early to call an investable low in [Bitcoin],” Colas said.

Patience Is Key: While he is a long-term believer in virtual currencies, Colas said investors should consider waiting to buy the dip until cryptocurrencies are no longer the trendy investment on Wall Street. Google search data suggests global interest in Bitcoin is at its highest level since December 2017, which was also a terrible time to be investing in Bitcoin.

“History says you want to buy [Bitcoin] when interest is low, and we’re not yet at that point,” he said.

Benzinga’s Take: It may seem like an excellent buying opportunity with Bitcoin prices down more than 41% from recent highs, but a look back at the previous Bitcoin bubble in 2017 suggests there could still be significant downside ahead in coming months. From peak to trough, the 2018 Bitcoin sell-off represented an 84% drop.