Bitcoin has always been a controversial subject. It has two extremes on both sides. There are financial professionals like Warren Buffet who called it a hoax that will never succeed. There are others like John MacAfee who believes that Bitcoin is worth more than a million dollars.
Opponents argue that Bitcoin is a scam that solves no problem while proponents argue that Bitcoin is the future of payment. In this article, we will look at several reasons to invest in Bitcoin this year.
While we believe that Bitcoin is an excellent asset, you should be warned that it is also a highly volatile product. Therefore, we recommend that you have a long-term view when you are investing in it.
A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.
- 1 Reasons to Invest in Bitcoin: Past Performance
- 2 Reasons to Invest in Bitcoin: Halving
- 3 Reasons to Invest in Bitcoin: Institutional Adoption
- 4 Reasons to Invest in Bitcoin: Speculation
- 5 Reasons to Invest in Bitcoin: Digital Gold
- 6 Reasons to Invest in Bitcoin: Demand High, Supply Low
- 7 Reasons to Invest in Bitcoin: High Adoption Rates
- 8 Final Thoughts
Reasons to Invest in Bitcoin: Past Performance
Critics argue that Bitcoin’s value will ultimately collapse as demand wanes. However, the reality is that Bitcoin has been among the best-performing assets in the past ten years. As you can see below, the value of Bitcoin has gone up by more than 2000% in the past five years. This is a much better performance than what stocks and gold have returned. The value has climbed in spite of the concerted efforts by critics.
Sure, the price has fallen significantly after reaching an all-time high of almost $20k in 2017. But stocks too decline. In 2008, US stocks declined by more than 40%.
To be clear. Past performance is never an indicator of future performance in the financial markets. This means that the price could underperform in the future. Still, owning a small part of Bitcoin will not hurt you at all.
Reasons to Invest in Bitcoin: Halving
In the cryptocurrency world, halving is a process in which the block reward is slashed into half. This simply means that the amount miners are rewarded is reduced by half. This event usually happens after a certain period of time.
This year, Litecoin went through halving, which made it one of the best-performing cryptocurrencies in the world. Bitcoin halving will happen in the coming year. This will mean that the supply of the currency will be reduced. As the supply is reduced, it means that the price will continue to increase. Judging by the incredible rise of Litecoin during its halving year, we expect that Bitcoin price will rise significantly in the coming year.
Reasons to Invest in Bitcoin: Institutional Adoption
Big institutional investors have always expressed their interest for Bitcoin and other cryptocurrencies. Last year, Blackrock, the world’s biggest asset manager said that it was exploring ways of investing in the currencies. Indeed, money managers who ignored the currencies have missed an opportunity to invest in the best-performing asset of the century.
The biggest reason why they have not invested is that the infrastructure for investing in Bitcoin has not been there. In recent months, many companies, including Fidelity and Citadel have brought new products that make investing in Bitcoin safer. This could lead to more demand.
Reasons to Invest in Bitcoin: Speculation
Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative. But I am not familiar with the specific product to assert whether it is the best potential setup. And we need a long time to establish confidence. –Peter Thiel
Contrary to the popular opinion, speculation is never a bad thing. In fact, some of the best-known investors have made their fortune in speculation. Whenever you invest in a stock, you are merely speculating that its value will go up. As such, you can invest in Bitcoin for speculation purposes. A great way to go about this is to spend some money and buy some Bitcoins and then leave it at that. If the price goes up, your investment will be rewarded greatly. If the price falls, you will lose your money but not a lot of it.
Reasons to Invest in Bitcoin: Digital Gold
Think about gold for a moment. Gold has been a great investment for people who want to hedge against risk. At the same time, gold does not have any use in the real world. Only a small amount of mined gold is used in the manufacture of jewellery. Still, gold is owned by many of the world’s most sophisticated investors. They do this because they expect the price to continue moving up. Most Bitcoin enthusiasts say that Bitcoin is the digital version of gold. This means that Bitcoin is an ideal hedge against risk.
Reasons to Invest in Bitcoin: Demand High, Supply Low
We believe that Bitcoin is an opportunity of a lifetime. Think about this. Unlike the US dollar that can be printed in large quantities by the Federal Reserve, Bitcoin is a finite resource. This means that Bitcoin has limited supply. The developers capped the Bitcoin amount to 21 million. To date, more than 17 million Bitcoins have been mined. Further, with halving nearing, it means that the supply of Bitcoin will be very tight. In fact, the number of Bitcoin miners has been falling because of the increasing cost of electricity. Therefore, we believe that demand for Bitcoin will continue to increase, which will lead to higher prices.
Reasons to Invest in Bitcoin: High Adoption Rates
In the past few years, the demand for Bitcoin has been on the rise. While Bitcoin is not used in large scale by retailers, the reality is that many countries need the currency. This is mostly because many countries are starting to be very uncomfortable with the dollar. The dollar has given the US a lot of power. This power has made the country be in a position to sanction many countries like Iran, Venezuela, North Korea, and Zimbabwe. It is believed that North Korean hackers are responsible for many large scale hackings that happen. We believe that more countries will continue to hold vast amounts of Bitcoins.
Even critics agree that Bitcoin has changed the world. The currency has ushered a new era in the world of finance and created a new category or asset class. While Bitcoin is trashed by many traditional experts, the reality is that its use will continue to grow. We believe that its price will continue to rise in future.
Crispus is a finance professional with more than a decade experience in the industry. Over the years, Crispus has written in-depth articles on leading platforms like CCN, Marketwatch, and Seeking Alpha. He also runs a Forex education and managed account company called WestEndFx.