Bitcoin had a relatively flat quarter in 2021 so far. Like any stock, a flat or correction period is necessary to hit a higher high. When the rally starts after this, Bitcoin has the potential to reach $100K this year. There is a runway ahead for Bitcoin because the market has not taken into account more adoptions by institutions at an increasing rate.
Gold is currently at a market cap of around $11T. In the longer term probably in 3 to 5 years, Bitcoin should be able to reach at least half of gold’s market cap at around $5T which brings the price to around $500k to $600k. It will not be a smooth ride, but after every correction, it should reach a higher high.
Let’s address the main concerns surrounding Bitcoin and find out why it’s going to stay.
Why is Bitcoin legit
There are three primary criteria to fulfil before something can become a form of currency or store of value. It must be trusted enough by the community to have value, provide an effective method of transfer, have a good unit of account so it is measurable and comparable.
- Trust. Bitcoin is built on blockchain technology, no central party can change anything on the blockchain without everyone knowing, transaction history is unchangeable and stored on every participants’ computer.
- Method of transfer. Buying and selling Bitcoin is easy with digital wallets.
- Good unit of account. 1 Bitcoin in one wallet will always be equals to 1 bitcoin in another person’s wallet. This cannot be changed.
What can Bitcoin be used for?
Bitcoin is a means to store value, it is an alternative compared to gold or bonds. Transferring of assets involving a big value can be accomplished by using Bitcoin, it is impossible to lose the Bitcoins unless a wrong address is used during the transfer. To use Bitcoin as an everyday currency, not so much. A transfer of Bitcoin does take some time, it will never be as fast as using a credit card or cash for fulfilling a purchase at a grocery store.
Why does the price of Bitcoin have an upside?
- Bitcoin has real-world functions
- Bitcoin has value in the financial sector. Financial services have been set up revolving. You can earn interest by depositing Bitcoin, this is something you cannot do with gold.
- Collateral loans can be taken out using Bitcoin.
- Scarcity and scaling. The supply of Bitcoin is fixed at 21M, and mass adoption is now happening at institutions. Strong demand will push the price to go up.
Referring to the Bitcoin wallet-size chart, wallets that own more than 1000 BTC have been going up in late 2020 and 2021. 1000BTC is worth around $16M to $50M in the past few months. Given the size of these purchases, these are probably institutions that have been buying into Bitcoin.
Bitcoin is here to stay.
Chances of Bitcoin going to 0 is diminished in recent years with rapid adaptation in the financial sectors offering loans using Bitcoin as collateral and offering an attractive interest rate at around 8% just for holding Bitcoin. The shift to digital assets is happening, and it is simply not possible for the world to do 180 degrees turn and drop the idea completely. Just like how the pandemic encouraged people to work from home, the shift has happened, and it is not likely to go back to office lifestyle fully.
Bitcoin is used for illegal activities and will be taken down by regulators soon
Bitcoin is the worst choice to use for illegal activities. Using Bitcoin for illegal activities is a bad idea because transactions are transparent and transaction history is unchangeable. The owner or person responsible for suspicious transactions can be found pretty quickly if the police or regulators wanted to. The means to remain hidden is by using cash, not Bitcoin.
Losing Bitcoins due to hacking
Since Bitcoin came into existence in 2009, the entire network has not yet been hacked. Hacking that happened was on exchanges where buying/selling was done. This could potentially discourage people from buying Bitcoin. If you have a substantial amount of Bitcoin, it is better to store it in a hard wallet after the transactions are done, which will then be impossible to hack.
If you are trying to grow wealth, the opportunity cost of not investing in Bitcoin is probably higher than the risk by investing in Bitcoin. You will be missing out on the shift to digital assets that is happening right now and lucky enough to be a part of.
Disclaimer: Always do your own due diligence before investing in a stock. Investing of any kind involves risk. I am not a financial advisor. Your investments are solely your responsibility and I do not provide personalized investment advice. It is crucial that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments. Please consult your financial or tax professional prior to making an investment.