on the crypto
After a terrible 2022, in which the overall cryptocurrency market lost about two-thirds of its value, investors are starting to take an interest in the sector again. This is a surprising turn given the series of major incidents that occurred last year with some cryptocurrency firms that were expected to completely undermine confidence in the digital asset market.
The bullish tone is good news for cryptocurrency investors looking to invest in this volatile sector. Undoubtedly, among the more than 22.000 digital assets in circulation, the Bitcoin (quotation BTC) is the one I would buy right now without hesitation. Here because.
A strong start to 2023
After hitting an all-time high of nearly $69.000 per coin in November 2021, Bitcoin took a tumble last year, falling 65% in 2022. The Federal Reserve's aggressive interest rate hikes, enacted to curb soaring inflation, they certainly helped turn investor sentiment from positive to negative. This also negatively impacted many growth tech stocks, as speculative assets were hit.
But as inflation, as measured by the widely followed consumer price index, continues to show signs of cooling, sentiment appears to have shifted towards the optimistic again. The entire cryptocurrency market gained 34% in value in January, with Bitcoin surging 37% for the month. Perhaps investors expect the Federal Reserve to return to a more accommodative stance sooner or later.
Of course, it goes without saying that short-term Bitcoin price movements are strongly influenced by changes in monetary policy. Therefore, it is virtually impossible to try to predict what will happen next. What I find encouraging is the renewed optimism surrounding Bitcoin right now. This will help spark more interest in the world's top cryptocurrency, which could sustain a further bull run in 2023.
A legitimate financial asset
In addition to the recent positive momentum, Bitcoin is well on its way – if it isn't already – to becoming a legitimate financial asset. There are various ways to access them. For example, investors can buy Bitcoin through App Cash from Block, Coinbase or Robinhood Markets. Also, there are several exchange-traded funds in the market that make it easier to get exposure to Bitcoin.
Individual investors can be inspired to purchase this digital asset from a number of well-known capital allocators. Prominent tech investor Cathie Wood is extremely pro-Bitcoin. Bill Miller, one of the most successful value investors ever, recently stated that Bitcoin is one of his top personal investments.
Then there is the regulatory landscape to consider. An Arizona State Senator recently pushed through a bill to make Bitcoin legal tender in the state, similar to what happened in El Salvador in late 2021. It is not known whether or not this bill will pass and become law , but shows that progress is being made in efforts to legitimize Bitcoin.
An important catalyst
At a high level, Bitcoin allows two unrelated parties to send and receive value from each other directly without a central intermediary. This is undoubtedly a revolutionary innovation. However, I believe the most important feature of Bitcoin is its sheer scarcity. There will only be 21 million coins mined and that will never change.
Every four years or so, the Bitcoin network undergoes a so-called “halving,” when the block rewards miners receive are halved. In the run-up to this event, Bitcoin has historically started to rise. The latest halving took place in May 2020, with the next one scheduled for March 2024.
While we shouldn't blindly assume that the future trajectory of Bitcoin's price will exactly match what happened in the past, the event will still shed some light on Bitcoin's fixed supply limit. And that alone can drive up demand from investors who want a piece of an asset that isn't subject to inflationary pressures like the US dollar. This favorable feature is reason enough to invest even a small portion of your hard-earned savings in Bitcoin.
