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3 Reasons To Buy Bitcoin Like There’s No Tomorrow
Bitcoin is just getting started and still has a lot to offer investors.
As tempting as cryptocurrencies may be, they are risky. While the blockchain technology powering these assets is innovative and has the potential to transform finance as we know it, their role in the future remains ambiguous and bordering on obscure.
Yet, there is one cryptocurrency with a proven track record that provides investors with the safest exposure to the best the cryptocurrency market has to offer. Here’s why I’m buying Bitcoin (BTC -0.68%) as if there was no tomorrow.
Image source: Getty Images.
1. The halving effect
On April 19, Bitcoin suffered its fourth halving. Occurring roughly every four years, halvings are the cornerstone of Bitcoin’s sound monetary policy, which prioritizes the preservation of scarcity value while cutting its inflation in half. With the fourth halving now past, Bitcoin’s inflation rate now stands at just 0.85%. This makes it less inflationary than what many believe to be the best store of value and inflation hedge, gold.
In the long run, it’s easy to see how continued declines in its inflation rate will benefit Bitcoin’s price growth. If demand for the cryptocurrency continues to increase, its declining inflation rate will put more pressure on its finite supply of 21 million coins. Add it all up and you have the perfect recipe for price appreciation.
Even in the short term, the halving effect makes Bitcoin a viable investment today. In years where a halving occurs, Bitcoin increases by an average of 125%. If measured year-to-date, this would put its price at just over $100,000, meaning there is still generous potential for returns today even with its price at around $65,000. However, the best that Bitcoin has to offer usually materializes in the year following a halving. Historically, during these years, Bitcoin has increased by over 400%.
2. Greater institutional interest and clearer role in the financial landscape
For most of Bitcoin’s existence, its rise to the top has been driven by retail investors. But now that’s about to change. With the approval of Bitcoin ETF Spotsinstitutional investors with vast capital reserves are able to easily invest in the cryptocurrency. Now that the biggest names on Wall Street have arrived, this is likely to put exceptionally more pressure on the finite supply of Bitcoin, pressure that has probably not been seen since its early days.
On a semi-related note, the fact that Bitcoin has even been approved for a spot ETF is an indicator of the current market perception of it and its role in the financial landscape. For example, consider that Ethereal (CRYPTO: ETH), the second most valuable cryptocurrency, is in the midst of an intense debate over ETF approval as regulators try to determine whether it is a security or a commodity. If this conversation is playing out for Ethereum, you can be sure that every other cryptocurrency will be similarly challenged.
Now, I’ll be the first to admit that just because the Securities and Exchange Commission (SEC) think of a cryptocurrency as a security does not mean that it is the end for a given blockchain. Most of these assets are quite decentralized and would continue to operate even if the SEC pursued litigation. Remember, cryptocurrencies are traded internationally and are not subject to the laws of any specific country.
However, markets do not like the idea of regulatory risks. This is why Bitcoin is such a safe investment today. The SEC has already deemed it a commodity and outside of its scope of control. This gives it unique staying power and an extra layer of insurance that it will not be hindered by regulatory scrutiny.
3. In a class of its own
Similarly, Bitcoin has attracted significant institutional interest and has a clear place in the financial landscape due to its fundamental characteristics, which make it unique compared to virtually all other cryptocurrencies.
When you invest in Bitcoin, you are investing in the most decentralized, secure, and proven cryptocurrency on the market. There is no single group that oversees its operations. We don’t even know who created it. All we know is that its creator used the pseudonym Satoshi Nakamoto and has been missing ever since.
No other cryptocurrency can claim this. Almost every other cryptocurrency has a known creator and a team of developers maintaining its functionality, which makes them much more likely to fall under the SEC’s purview.
In contrast, Bitcoin has operated more or less in its original form for the last 15 years, devoid of any central figure or authority. In other words, even if the SEC wanted to take action against Bitcoin, they couldn’t. Who would sue? The creator of Bitcoin is unknown and it runs on the most decentralized network with thousands of nodes around the world.
Final thoughts
All things considered, I would venture to say that there is never a bad time to invest in Bitcoin. Are there better times than others? Sure. Investing in the middle of the crypto winter should yield better returns than investing at the peak. However, data shows that as long as investors hold on long enough, even if you bought at the peak, you will still see generous returns in the long run.
AS legal tender continue to be inflated, institutional interest continues to grow, and halvings continue to happen, Bitcoin is poised to continue to exceed expectations and demonstrate why it is unlike any other asset. Michael Saylor, a well-known Bitcoin investor and CEO of Microstrategy (which holds about 1% of the total Bitcoin supply), could have said it better: “I will continue to buy when it tops out.”