Bitcoin has gone through many ups and many downs, but regardless of what the mainstream financial media and talking heads might say about it being ‘dead’ and ‘a ponzi’, it’s still going strong and in fact has just recovered from yet another painful bear market.
The fact remains that Bitcoin has been the best investment this decade. There are few points in its history where you could of invested in the digital asset and be worse off for the transaction. This year alone we have seen an astronomical increase of over 200%, and though still down 50% from its all time high in 2018 the actual period of time where it sat above current levels was very short.
So the big question we keep hearing is, where is Bitcoin heading now?
Well there are certainly many reasons to be bullish on Bitcoin over the coming year. Here are just a few factors which could drastically reflect in the price of Bitcoin.
Bitcoin Mining Rewards Halving
The Bitcoin blockchain is secured by what is called Mining, these miners have the job of verifying all transactions and for doing so are rewarded in freshly minted Bitcoin. The amount rewarded decreases every 210,000 blocks which is about every 4 years, eventually no more bitcoins will be minted and miners will only receive fee’s incurred from transaction fee’s.
Currently 12.5 Bitcoins are rewarded to miners for every block successfully verified, the next halving is estimated to occur in under a years time, around June 2020. Rewards will be halved and miners will receive just 6.25 Bitcoins for their work.
This process is part of Bitcoins unique inflation mechanism, unlike traditional fiat currencies, Bitcoin has a limited supply of just 21 million bitcoins and can only be created according to the schedule of the protocol.
In a nutshell, when Bitcoin rewards decrease, Bitcoins value is expected to increase. Supply and Demand 101.
World Economy Entering Troubled Waters
The next major factor which we need to look at when considering where Bitcoins value might be heading in the near future is state of the worlds economy.
There is no shortage of reasons to be concerned about the state of the Economy, every where we turn at the moment there are serious issues on the boil.
With ongoing tensions between the US and various Countries around the World including China, Russia and Iran. The Stock market has been in serious bubble territory for some time and the housing markets are popping left, right and centre in many Countries. Add to this the number of Countries now defaulting on their loan repayments and you have a recipe for disaster. Gold prices are often a good indicator for general sentiment in the markets, and as you may know Gold has just broken out of a long time bear market, hitting new all time highs in many parts of the World.
Its being reported that central banks around the world are buying up gold for their reserves:
Nations added 374.1 tons in the first six months as Russia and China kept building reserves and Poland made a massive purchase. The trend is expected to continue, with a recent survey of central banks showing 54% of respondents expect global holdings to climb in the next 12 months. [Bloomberg]
You maybe wondering why exactly we are interested in the gold market, when we are talking about Bitcoin? Well, Bitcoin is a very similar asset class to Gold – many even refer to Bitcoin as ‘Digital Gold’. They both share many of the same properties, though some would say Bitcoin does have some improvements on Golds fundamentals.
For instance, both have a finite supply, though Bitcoin has a known finite supply – whereas Gold has an unknown supply, which could increase dramatically as space exploration expands.
Both Gold and Bitcoin require intensive work to mine. Both assets also are virtually impossible to counterfeit, again with Bitcoin probably taking the lead in its counterfeiting protection.
So for this reason many people are beginning to diversify their assets into Bitcoin, even many of the die hard Gold bugs are now seeing the potential Bitcoin has to offer as a safe haven in times of economic turmoil.
The Soundest Money on Earth
To anyone that has studied, understood and subsequently appreciated Austrian Economics, Bitcoin may seem like a gift from the gods. By the design of its protocol Bitcoin is trustless, immutable, finite, deflationary and decentralized – it is the perfect example of sound money.
“money that is easy to produce is no money at all, and easy money does not make a society richer; on the contrary, it makes it poorer by placing all its hard‐earned wealth for sale in exchange for something easy to produce.” – Saifedean Ammous, The Bitcoin Standard
Bitcoin is highly divisible, very secure and best of all unconfiscatable – your money is your money and nothing can change that unless your give permission or are incompetent in securing your own bitcoin. This is one reason why education around how to use Bitcoin is crucial to anyone wanting to get involved with the asset.
Believe or Not Believe, That is the Question
The only investment strategy you really need when considering whether to get involved with Bitcoin is whether you believe in Bitcoin.
If you believe in the protocol and what it can offer to the World then investing in it is a no-brainer, as if you truly believe it will one day be adopted and widely used in day to day wealth transfers then its value can only go one way, up and significantly so!
If you do not believe in what it stands for and what it can offer the World then investing in Bitcoin would be nonsensical.
Many believe Bitcoin will some day be worth over $1 Million per Bitcoin and in all honesty this is a fairly conservative estimate based on its supply. Where ever it tops out at, where it is now in terms of dollar valuation is likely to be relatively small compared to where it is going in the future. In our personal opinion $10K bitcoin is very undervalued.
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