The stock market hasn’t had a good year in 2022 thus far, as the broad index has dropped 11% through the end of April. Inflationary pressures, the Federal Reserve’s intention to keep raising interest rates, and geopolitical uncertainty have caused investors to take a risk-off posture. Cryptocurrencies are no exception.
It should come as no surprise that when the economy sours, investors become wary of the most speculative assets. Despite the fact that the cryptocurrency market has lost over 19% of its value in 2018, I believe it still offers a valuable opportunity for patient and long-term investors.
Here’s why Bitcoin is the one crypto I’d buy today.
Bitcoin is the first mover
Bitcoin was introduced in 2009, making it the world’s first crypto currency. Bitcoin was created to be a decentralized, worldwide payment system, and its price has risen 3,000% in the last five years. And with a market capitalization of around $730 billion, Bitcoin easily outpaces any other cryptocurrency on the market by a long shot.
One of the most notable aspects of Bitcoin is that there will only be 21 million pieces ever produced. The limit on the number of coins created means that as demand increases, so does the price. As well as creating a sense of scarcity for Bitcoin, this also serves to keep investors interested.
Bitcoin will benefit from having a growing set of infrastructure, tools, and services supporting it as the first mover in the crypto industry. Coinbase, PayPal, and Robinhood Markets make it simple to acquire Bitcoin. Block, headed by Jack Dorsey, is attempting to take Bitcoin mainstream with its Spiral and TBD segments. Goldman Sachs is trying to give its wealthy clients access to top cryptocurrencies through exchange-traded funds and other products.
Bitcoin’s position as the most-extensively developed, longest-running, and most well-known cryptocurrency makes it an excellent addition to a diversified portfolio.
Bitcoin has a bright future
Despite the fact that Bitcoin has lost 19% of its value this year, there are three budding use cases that suggest it is a good investment.
Many supporters consider Bitcoin to be a sort of digital gold. However, in comparison to real gold, Bitcoin is simpler to store, can be utilized in transactions, and is divisible. And as more people use Bitcoin as a store of value, its price should rise.
Furthermore, several large businesses, such as Tesla and MicroStrategy, have chosen to utilize part of their cash on their balance sheets to acquire and store Bitcoin. With inflation continuing to erode the dollar’s purchasing power, I can see other firms following this example.
Finally, Bitcoin’s ability to cross borders with practically no fees and quick settlement makes it a viable option in the global remittance market. Money sent back from abroad is important to developing countries like Mexico and India. The difficulty, though, is that legacy money transmission services charge hefty fees, which are basically a tax on these people’s livelihoods. Bitcoin may be able to address this issue.
When compared to the stock market, cryptocurrencies are still extremely hazardous and unpredictable. However, it does not imply that investors should write off the asset class entirely. I believe that investing up to 2% of a well-diversified portfolio in Bitcoin provides enough exposure to mitigate risk while also capturing the potential for large gains over time.