Why Bitcoin is the new Gold
Bitcoin has been on quite a road trip for the last couple of months. It went from $5,000 to $20,000 in less than a year. A very impressive 4x if you had invested in March. So what’s the deal?
Today — Dec. 16th — Bitcoin reached an all-time high at more than $21,000. A 420%, nice, rise from back in March. The last time this happened with Bitcoin was back in 2017, but I believe it’s here to stay for good.
With rising inflation and uncertainty in the U.S. Dollar, it would make sense for a modern revolution of the currency we know today to take place. Bitcoin as a payment method would be safer and cheaper, not to mention easier.
Ruffer, a UK-based investment management company with more than £20bn (roughly $27bn) in assets under management, last month made a bet on bitcoin that is now worth around £550m (roughly $742m), in one of the biggest signals of growing demand among traditional investment managers.
Ayush Ansal, the chief investment officer of Crimson Black Capital, a hedge fund, said that public interest in bitcoin would be renewed over Christmas. “After being in a wasteland since the infamous bull run of late 2017, crypto, and bitcoin, in particular, are back.
The Future of Cryptocurrency
Some economic analysts predict a big change in crypto is forthcoming as institutional money enters the market.
Moreover, there is the possibility that crypto will be floated on the Nasdaq, which would further add credibility to blockchain and its uses as an alternative to conventional currencies. Some predict that all that crypto needs is a verified exchange-traded fund (ETF). An ETF would definitely make it easier for people to invest in Bitcoin, but there still needs to be the demand to want to invest in crypto, which might not automatically be generated with a fund.
Not a lot of people own bitcoin, and that introduces a big potential number of newcomers to the cryptocurrency. Only about 2% of Americans own bitcoin, and if that were to surge to 10% worldwide, bitcoin could easily experience a 10x fold in valuation.
‘To me, it seems like a great alternative to current currencies, with a much easier and wider opportunity for one global currency. Transfers could be made in milliseconds, rather than business days. It would make both the individual's life, as well as business’ ease of transaction, way more approachable.
Founder and CEO of Ark Invest, a famous Tesla-Bull, says it could surge as high as $500,000. Even though it’s an optimistic outlook for the bitcoin valuation, it seems like a possibility, especially now that it has such large media coverage.
Understanding Bitcoin
Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables all functions such as currency issuance, transaction processing, and verification to be carried out collectively by the network.6 While this decentralization renders Bitcoin free from government manipulation or interference, the flipside is that there is no central authority to ensure that things run smoothly or to back the value of a Bitcoin. Bitcoins are created digitally through a “mining” process that requires powerful computers to solve complex algorithms and crunch numbers. They are currently created at the rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, a level that is expected to be reached in 2140.7
These characteristics make Bitcoin fundamentally different from a fiat currency, which is backed by the full faith and credit of its government. Fiat currency issuance is a highly centralized activity supervised by a nation’s central bank. While the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuance. In addition, local currency deposits are generally insured against bank failures by a government body. Bitcoin, on the other hand, has no such support mechanisms. The value of a Bitcoin is wholly dependent on what investors are willing to pay for it at a point in time. As well, if a Bitcoin exchange folds up, clients with Bitcoin balances have no recourse to get them back.
Should you invest?
I think now is as great an opportunity as any, and I certainly believe it will surge higher. Bitcoin still has a lot of momentum and potential investors, now that it’s joining the hedge fund world. A lot of people are opening their eyes to bitcoin, and seeing what great possibilities it has.
This could be the beginning of something great…
Disclaimer: This should not be taken as investment advice, and you should seek a professional adviser if you have any doubts or questions. We are not responsible for any losses endured because of this article, or any future articles that we may write on this subject.
Disclaimer II: I own a small investment in bitcoin, but I have no intention of investing in the cryptocurrency in the next 72 hours.
