14th April, 2022
Bitcoin’s security and secrecy are appealing to libertarians, and investors are hoping to make a fortune. In several poor countries, people trust it more than their own money. However, is it the future of money?
Cryptocurrencies (also known as crypto assets or digital currencies) were considered experimental. However, that is no longer the case.
They’ve made news outside of the financial pages in recent years for good reason: the value of the most well-known, Bitcoin, doubled between December 2020 and May 2021, then crashed, losing more than a third of its worth.
It had risen to a historic high by November 2021, only to tumble many times during the winter. The peaks and troughs of Bitcoin’s price chart have had both an intriguing and troubling path.
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Several well-known names in Silicon Valley and US finance have lent credibility to Bitcoin. BlackRock, the world’s largest asset manager, authorized two of its funds to purchase Bitcoin-based futures in January 2021.
PayPal, the online payment platform, unveiled a service in March that allows users to ‘checkout with crypto.’ Two months later, Goldman Sachs committed a team to Bitcoin trading, allowing its clients to wager on its value, and Morgan Stanley, a competitor, announced the opening of three cryptocurrency investment reserves for its high-net-worth clients.
At first glance, Bitcoin appeared to be on its way to becoming the world’s most valuable currency. It was even envisioned as a substantial store of value by some (like gold, which retains its value long-term).
However, it is still a long way from becoming a full-fledged currency, and we’re a long way from paying for our groceries with Bitcoin. Given the difficulties it has encountered during its development, this is likely good news.
Should You Buy Bitcoin Now?
Bitcoin is not only an excellent inflation hedge, but it also has considerably superior long-term growth potential than gold. Bitcoin, on the other hand, is far more volatile than gold, which may deter risk-averse investors from investing in it at all.
Essentially, Bitcoin trading is perhaps the best option out there if you’re searching for a recession-proof investment that can fight inflation and something with long-term growth potential.
Bitcoin’s use cases and popularity should only grow from here, even though it is sitting around an all-time high.
Because of its continually rising demand and limited supply, its price should continue to rise.
Investors who want to escape Bitcoin’s volatility (which can be rather annoying) might instead go for gold or high yield stable coins.
Bitcoin’s Limited Supply & Increasing Demand
The fixed quantity of 21 million coins, roughly 19 million of which have already been mined, is one of the major reasons why Bitcoin is a superior inflation hedge than other cryptocurrencies.
Because new coins cannot enter circulation due to an ironclad set supply, there is no chance of inflation.
A country like the United States, on the other hand, can simply raise the money supply by investing and buying government bonds to cut interest rates, weakening the purchasing power of the dollar, and unintentionally producing inflation.
Bitcoin Is Easily Transferable
Like gold, Bitcoin is long-lasting, easily convertible, secure, and limited. Bitcoin, on the other hand, is portable, transferrable, and perhaps more decentralized than gold.
Sovereign states such as the United States, Germany, China, and other European countries control most of the gold supply. Anyone in the world, theoretically, can keep and protect their Bitcoin much more effectively than gold.
Bitcoin’s practical use cases as a currency are limited in wealthy countries due to outdated fiat currencies of their own.
However, in countries prone to hyperinflation and political unrest, Bitcoin is a preferred medium of exchange.
From a financial standpoint, the only question is whether Bitcoin is a financial hallucination bound to fail or a new asset class destined to become a part of the investment landscape.