Bitcoin has transformed from an obscure digital invention into a major financial asset and a household name with the potential to revolutionize money. Since Bitcoin was launched in 2009 after the global financial crisis, it has charted an impressive growth trajectory in value along with increased adoption. This article explores the current Bitcoin investment thesis and reasons why it may be strategically valuable to hold Bitcoin for the long term, especially in 2023.
A Brief History of Bitcoin
At its core, Bitcoin is decentralized digital money with verifiable scarcity. The supply is algorithmically capped at 21 million coins. It leverages peer-to-peer technology and cryptography to enable a censorship-resistant, trustless exchange of value independent of centralized intermediaries. Transactions are validated and recorded on a public ledger called the blockchain.
Bitcoin’s evolution has resulted in emergent monetary properties, including predictable issuance, strict inflation control, liquidity, relative stability, pseudo-anonymity and settlement finality. These have turned it into a viable store of value and financial asset, often drawing comparisons as “digital gold.”
Why Bitcoin is Still a Good Investment?
Investing in Bitcoin remains a compelling investment for several reasons, even as the financial landscape evolves. Here are key factors that contribute to the enduring appeal of Bitcoin:
Limited Supply & Scarcity
Bitcoin’s total supply is capped at 21 million coins. The rate of Bitcoin issuance is also set to decrease by half approximately every four years through an event known as the “halving”. As of 2023, roughly 19 million bitcoins have already been mined. This means only around 2 million coins remain to be mined over the next 100+ years before the supply cap is reached.
This controlled and diminishing rate of new Bitcoin being introduced incentivizes holding. The strict issuance protocol cannot be manipulated, unlike monetary policies implemented by central banks in jurisdictions like the U.S., EU, and China.
The verifiably scarce bitcoin supply reduces inflation risk and enhances utility as a long-term store of value. Since value is highly subjective and driven by supply relative to demand, bitcoin’s scarcity makes it well-positioned to see further value accretion if adoption continues growing.
Table 1: Global Inflation Rates (2020-2022)
Data Source: IMF
At the end of 2022, an estimated 321 million people worldwide owned some amount of cryptocurrency –- up from 295 million at the start of the year according to Crypto.com. Bitcoin and the blockchain ecosystem are seeing rapidly growing development, investment, and adoption across retail, enterprise, and institutional sectors:
- Multinational corporations adding bitcoin to corporate treasuries
- Sovereign wealth funds allocating capital into crypto assets
- Prominent investors like Paul Tudor Jones and Stanley Druckenmiller endorse bitcoin
- Established banks offering custodial crypto services to clients
- Leading universities establishing academic blockchain research initiatives
Greater mainstream adoption reinforces network value, enhances legitimacy, and attracts new entrants, applying sustained upward pressure on the bitcoin price. As the digital future inevitably unfolds, bitcoin is well-positioned as the dominant blockchain application in both finance and mainstream consciousness.
A New Institutional Investment Vehicle
Extensive due diligence and competition to secure access to the scarce bitcoin supply make it highly compelling for large investors to hold over long time horizons. Bitcoin’s potential to hedge against global financial system vulnerabilities has also attracted institutional investors.
According to JPMorgan analysts, bitcoin may be eating into gold’s ~$2.6 trillion market share as the leading universal value storage mechanism. Investment flows into Bitcoin Investment/Trust Products were estimated at $6.7 billion as of December 2021. With its provable scarcity and projected deflationary properties, bitcoin can uniquely satisfy institutions and high-net-worth individuals seeking non-confiscatable and non-debatable assets to preserve multigenerational wealth.
Bitcoin also offers uncorrelated, asymmetric returns from global stock indexes. This diversification ability offers managed funds tactical opportunities to enhance risk-weighted portfolio performance.
Lower Transfer Fees
While often viewed as solely a store of value, Bitcoin also facilitates cross-border payments more efficiently than traditional financial institutions. Transactions settle much faster, avoiding long processing delays. Additionally, Bitcoin’s pseudo-anonymity offers more privacy than legacy bank transfers requiring extensive personal details.
International payments involving currency conversions and multiple intermediaries often incur high fees upwards of 10%. Bitcoin offers more reasonable rates, especially compared to large consumer banks as the examples illustrate:
Table 2. International Transfer Fees
|Bank of America
Other prominent cryptocurrencies leverage similar decentralized architectures for lower-cost global payments:
Table 3. Cryptocurrency Transfer Fees
The numbers showcase how both Bitcoin and altcoin transfers remain economically viable for relatively small remittances compared to the high flat fees charged by banks, especially satisfactory for global settlements.
This cost advantage enhances Bitcoin’s appeal for regular P2P transactions, not just long-term storage for large amounts. While volatility and scalability are still issues, the global immutability provided by Bitcoin’s blockchain provides unique utility to transfer value securely without authorization using one’s keys – the full promise of digital cash realized.
What are the Risks of Investing in Bitcoin?
Bitcoin has experienced multiple boom-and-bust cycles since its inception. Huge upward price movements have often been followed by steep declines of 50-80% or even more over months. Significant downside risks remain due to high volatility.
However, in contrast to traditional equities or commodities, bitcoin’s volatility actually arises from variations in global demand since natural supply is effectively fixed. The Bitcoin protocol remains completely unchanged. Volatility can thus be interpreted as a representation of its rapid growth and integration into the global financial system rather than structural deficiencies.
As investor demographics continue shifting towards institutions and capital allocations grow, excess volatility is likely to taper off, eventually stabilizing Bitcoin into the apex store of value and unit of account.
Questionable Mainstream Viability
Many critique Bitcoin’s slow transaction times and high costs as impractical for small everyday purchases. Its current limitations also make bitcoin more comparable to a speculative financial asset rather than digital cash. However, bitcoin was not originally intended to replace all currency but rather act as sound money insulated from political debasement and catastrophic loss in value.
Most in the industry recognize Bitcoin’s challenges for microtransactions and are not bothered given its fulfillment of the vital store of value use case. Critically, bitcoin’s base-layer protocol remains the most secure blockchain in existence making it ideal for large transfers and final settlements. Efforts are also underway to build overlay networks leveraging Bitcoin as a settlement base for scalable retail transactions through innovations like the Lightning Network.
Financial regulators remain the largest existential threat. However, developed jurisdictions have so far established entirely reasonable guidelines, for instance, classifying bitcoin as a commodity. Outright cryptocurrency bans are generally unrealistic given technological decentralization, only temporarily disrupting markets.
The cryptocurrency community continues prioritizing compliance to ensure bitcoin markets develop within legal frameworks and build constructive relationships with regulators. Most policymakers have recognized that prohibitive regulations would simply handicap domestic innovation and economic competitiveness while having minimal impact on open-source protocols accessible by anyone globally.
Where Should I Buy Bitcoin?
With the proliferation of cryptocurrency exchanges, investors now enjoy ample options to purchase bitcoin. However, poor liquidity, security breaches, and subpar customer service still plague many trading platforms.
After enduring our share of issues, we have curated a list of highly-regarded industry leaders that excel across these crucial evaluation criteria:
Binance stands atop as the most popular cryptocurrency exchange, averaging over $20 billion in daily trading volume. Its extensive altcoin support, low fees and smooth user experience explain its dominance. Binance prioritizes security and storage safeguards for client assets.
Kraken has cultivated a reputation for stability and reliability throughout its decade-long history. Strict verification standards provide peace of mind over counterparty credibility. Kraken Pro offers a highly customizable trading interface for active investors. Client service generally garners praise for expertise and responsiveness.
Should I Buy Bitcoin Right Now?
Determining optimal entry points confounds most investors. Timing bottoms or tops precisely proves nearly impossible. Too many external variables remain mercurial.
Rather than fixating on day-to-day price fluctuations, steadfastly adhering to an accumulation schedule helps mitigate timing risks. Cost-dollar averaging eases market exposure at regular intervals. Portfolio allocation should correspond to individual time horizons and risk tolerance.
Although imprecise, favorable periods for enlarging Bitcoin investments generally coincide with:
- Prolonged bearish sentiment and stagnant prices
- Major technological milestones on the horizon
- Upcoming ‘halvings’ approx. every 4 years
- Early adoption stage when further upside exists
The most prudent buy trigger links to personal financial bandwidth. Speculate based only on amounts one can forfeit without meaningful lifestyle impact.
Is it Safe to Buy Bitcoin?
Substantial Bitcoin investment merits safekeeping vigilance. Many exchange hacks and fraud schemes still target cryptocurrency neophytes. However, various protective measures mitigate hazards:
- Verify exchange security practices and insurance coverage
- Enable multifactor authentication
- Frequently change passwords
- Withdraw holdings into cold storage devices
- Screen transaction recipients for legitimacy
Mindfully scrutinizing where one purchases Bitcoin provides a crucial first step. Security ultimately demands personal accountability. However, staying alert to ecosystem exposures facilitates informed self-custody and asset protection.
Final Verdict on the Bitcoin Investment for 2023
Considering both supporting and opposing dynamics, Bitcoin’s overall long-term investment proposition appears overwhelmingly positive. Major risks around volatility, integration, and regulation seem adequately mitigated.
In an increasingly uncertain economic and geopolitical environment with fiat currencies plagued by reckless inflationary policies, bitcoin’s incorruptible digital gold traits position it as uniquely suited to prosper through uncertainty as a dependable store of value.
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