.jpg "Is Bitcoin a worthwhile investment? Bitcoin (BTC) has been one of the best investments in the world since it was first established in 2009. Unfortunately, 2022 was a bloodbath for Bitcoin investors. The \"cryptocurrency winter\" caused bitcoin prices to fall by about 60% to date as of September 21, and investors must now decide whether to buy the decline or run toward the hills.")
Is Bitcoin a worthwhile investment?
Bitcoin (BTC) has been one of the best investments in the world since it was first established in 2009. Unfortunately, 2022 was a bloodbath for Bitcoin investors.
The "cryptocurrency winter" caused bitcoin prices to fall by about 60% to date as of September 21, and investors must now decide whether to buy the decline or run toward the hills.
Here are some things each investor needs to know about bitcoin :
- Thesis Bitcoin bull.
- Winter encryption.
- The risks of owning bitcoin.
- How to invest in bitcoin.
- Bitcoin's future.
Thesis Bitcoin Bull
Bitcoin investors may have experienced anxiety in 2022, but there are plenty of reasons to be optimistic.
First, Bitcoin remains the world's most popular and valuable cryptocurrency, with a market value of more than $360 billion.
Second, Bitcoin's long-term record speaks for itself. Bitcoin first crossed the $1 threshold in April 2011. In just over a decade, the cryptocurrency rose to $68,789 in November 2021 before falling to about $19,000 in September.
Bitcoin has a relatively loose relationship with other asset classes
- This makes it an attractive tool for portfolio diversification.
- It has a steady offer, meaning investors will not be adversely affected by mitigation.
- Fixed supply may eventually make it an attractive hedge against inflation and a stock of value
- Although his extreme volatility has limited his attractiveness in those sections to this point.
If Bitcoin eventually becomes the world's digital currency
Demand for them will grow dramatically as well as their price. The decentralised design of Bitcoin contributes to the network's security and ability to withstand fraud, tampering, and manipulation.
Bitcoin can serve as a vehicle for people around the world living in areas with bank shortages or countries with unstable financial systems to protect their wealth and access critical financial services.
Crypto Winter :
Unfortunately for bitcoin investors, ultra-high inflation prompted the US Federal Reserve to start raising interest rates aggressively in 2022, leading to lower prices for risk assets.
While bulls in Bitcoin have described cryptocurrency as a hedge against inflation, Bitcoin actually had a positive correlation with stock prices in 2022.
Low cryptocurrency rates revealed cryptocurrency lending companies and highly indebted hedge funds
This led to several high-profile bankruptcies and the collapse of the $60 billion LUNA and the associated Terra USD (UST) stable currency.
Even the world's largest stable currency, Tther (USDT), briefly lost its peg to the US dollar during the worst winter fluctuations of cryptocurrencies.
Sokanta Sekhar Das, CEO and co-founder of CoinMarketBag, says inflation is the main reason Bitcoin 2022 weakened.
Sekhar Das says :
"Inflation is definitely killing markets - and with bitcoin tied to stocks more closely than true believers feel comfortable, it is difficult to separate macroeconomic performance from bitcoin performance."
"If we can control inflation, then I think bitcoin will enter a bull market going through most of 2023," he says.
Risks of owning Bitcoin
- It might seem like a long time since Bitcoin's first transaction in about 13 years.
- But cryptocurrencies do not have long-term tracking records for other common asset classes
- like stocks and bonds. As can be seen from 2022
Bitcoin is also prone to periods of extreme volatility, such as its collapse of approximately 80% in late 2017 and 2018.
Additionally :
It is even difficult for financial analysts to determine the real value of bitcoin because it does not generate cash flows or revenue, nor does it represent the ownership of physical assets or intellectual property.
Instead, its price is exclusively associated with investor sentiment, which can be unexpected and inconsistent.
- Bitcoin also poses a significant risk to the environment.
- Bitcoin mining produces about 40 billion tons of CO2 per year
- It is a huge red flag for any investor interested in environmental, social and governance principles, or ESG.
At this point, the cryptocurrency market is regulated very loosely.
Until this point, the U.S. Securities and Exchange Commission has repeatedly rejected potential instant exchange-traded funds from Bitcoin, or ETFs, because of concerns about investor safety.
Bitcoin may eventually pose a serious threat to paper currencies and the traditional financial system.
The more common bitcoin becomes, the more regulators crack down on investors. More regulation may make Bitcoin less attractive to some investors but more attractive to others.
Markus Sotirio, an analyst at listed digital asset broker GlobalBlock, says regulatory clarity may open the door to more institutional investment in Bitcoin.
Sotiriou says :
Government intervention in the cryptocurrency market is a key talking point right now among investors, as we still need the clarity we need for the cryptocurrency industry to thrive.
How to Invest in Bitcoin
There are a number of different ways investors can identify Bitcoin.
Investors can buy cryptocurrency directly in their accounts on platforms such as Robinhood Markets Inc. (stock bar: HOOD) and Coinbase Global Inc. ( COIN ) و PayPal Holdings Inc. ( PYPL ) و Cash App.
Alternatively, more advanced traders can trade bitcoin futures and futures options for leverage or hedge their positions.
Investors can also buy shares of ETFs in bitcoin futures or trust funds.
ETFs are traded for popular bitcoin contracts on major US exchanges just like stocks.
- These ETFs include a strategy
- ProShares Bitcoin ETF (BITO)
- VanEck Bitcoin Strategy ETF (XBTF)
- Valkyrie Bitcoin Strategy ETF The Gayscale B
Finally, investors can buy shares of bitcoin mining companies, keep them on their balance sheets or benefit from their higher price.
These stocks include companies such as Coinbase and Block Inc. ( SQ ) MicroStrategy Inc. ( MSTR ).
Bitcoin's Future
Even after hitting bitcoin prices in 2022, the world's most popular cryptocurrency continues to rise 81% over the past three years and 411% over the past five years as of September 21.
They look extreme, but the volatility of bitcoin prices this year is actually fairly typical. In fact, Bitcoin has not completed a single calendar year without at least a 60% annual gain or loss since 2015.
BTC volatility can be frustrating for investors, but it stems from a combination of Bitcoin's immense potential and its completely uncertain outlook.
Justin Daniels, co-chair of Baker Donelson Blockchain and Digital Assets Technology Practice, says the entire cryptocurrency and blockchain space is still in its infancy.
Daniels says :
"I think we're going through a period of time similar to what we talked about how the Internet could be useful, and then we went through the dot-com bubble that exploded."
The stock market eventually recovered from the dot-com bubble explosion, and Daniels says bitcoin prices will also eventually recover from crypto winter as well.
"In the long run :
Bitcoin will bounce back because we move into a cashless society. Regardless of its drawbacks, Bitcoin is a much better alternative monetary system for people around the world who do not deal with banks or whose government controls the currency heavily, "he says.
Comments
Post a Comment