Is it too late to invest in Bitcoin?
A lot of people still don’t understand Bitcoin. They say he’s not doing anything that couldn’t be done before. That it has no intrinsic value. How dirty it is, both in terms of emissions and use by criminals.
The indictment against Bitcoin is long. Cryptocurrency is volatile and its price movements are impossible to predict or explain, even in hindsight. The market is dominated by a handful of investors known as Whales, who can change the price at will, or in the case of Tesla founder Elon Musk, with just one tweet.
Yet even its harshest critics have to accept that with a market cap of $ 1,000 billion, Bitcoin has made its point.
He survived the contempt and derision of the great and the good – from Warren Buffett to economist Nouriel Roubini, who believes that “the Flintstones had a better monetary system.”
Now it has even resisted a regulatory crackdown from China, which has shut down Bitcoin miners or taken them overseas.
Matjaz Skorjanc, founder of cryptocurrency platform NiceHash, suggests that Bitcoin has actually benefited. “It’s even stronger now that governments see it as a threat because it proves it works.”
On July 20, the price fell below $ 30,000. As of this writing, it has almost doubled to $ 60,000. Some think the price might soon reach $ 100,000 or $ 120,000, but did you leave it too late?
It’s never too late to get into Bitcoin, just as it’s never too late to get into gold, says Anton Altement, Managing Director of Polybius and OSOM Finance. “Both assets are seen as a reliable store of value and it is likely that this will remain so for the foreseeable future.”
The price is driven by two underlying megatrends, he says. The first is monetary easing, as low interest rates and money printing increase the attractiveness of Bitcoin, the supply of which cannot increase.
The second is its increasing adoption by large financial institutions, says Mr. Altement. “As crypto assets mature and their purpose becomes clearer, institutional investors are more inclined to embrace them.”
In a new impetus, the International Swaps and Derivatives Association is integrating cryptocurrencies into its transactional framework, he says.
Marcus de Maria, Managing Director of Investment Mastery, also said this was just the start. “Less than 4% of the world’s population own Bitcoin, which means it has a lot of room to grow.”
Only 21 million Bitcoins will be created, which is less than the number of millionaires in the world, he says. “It is now seen more as a store of value, like gold, but far superior – many call it ‘liquid gold’ because it can be sent around the world in a matter of minutes.”
One question remains, said M. de Maria. “Bitcoin is like money 2.0 because it is cheaper, faster and more accessible. So why didn’t people buy when he took the plunge? “
His response is that investors let emotions take over. “Instead of being happy when it falls, they are afraid. The danger is that too many people buy high and sell low, instead of the other way around. “
Mr. de Maria is concerned that private investors will make the opposite mistake if Bitcoin now flies to $ 100,000. “At this point the sky is the limit and that’s when the real fear of missing out, or Fomo, will kick in.”
The market is seething with anticipation of a new all-time high for Bitcoin, but calling price movements “a fool’s race,” says Simon Peters, crypto-asset analyst at the multi-asset investment platform eToro.
Despite all the frenzy around Bitcoin, the most common strategy is to buy and hold, or as Bitcoin traders call it, HODL.
It reduces supply and drives up prices. “More than 2.37 million Bitcoin has gone from short-term holders to longer-term holders in the past seven months, according to Glassnode. During that time only 166,000 were mined, ”said Peters.
He expects to see price resistance towards the $ 60,000 level and potentially a pullback.
Crypto investors should focus on long-term token use cases, said Peters. “Focusing on short-term price movements is a very risky approach. “
Cameron Parry, founder of the banking platform challenger Tally, says the highly concentrated ownership of Bitcoin makes extreme volatility inevitable.
“It is estimated that 2% of Bitcoin wallets own between 70% and 95% of all coins. This puts the currency at the mercy of ‘whales’, which can have a huge impact on prices, ”he says.
No viable currency can be so sensitive to the actions of a mere handful of players, says Parry.
While the United States Securities and Exchange Commission may have sparked the recent leap by saying it had no intention of banning Bitcoin, “reports that a mysterious investor, or a group of investors, placed an order for $ 1.6 billion also helped, “said Ross Thompson, finance and accounting professor at Arden University in the UK.
Cryptocurrency thrives on this type of speculation, which will lead to impressive peaks or huge drops, Thompson said. “There will probably be another drop sooner rather than later, giving people the opportunity to invest.”
It may also be worth keeping an eye out for other rising cryptocurrencies, like the Shiba Inu, he says.
Don’t look for rhyme or reason in all of this, says Thompson. “The rise in the price of Bitcoin suggests that speculators are betting on good times to come. What it is is still difficult to understand.
El Salvador’s adoption of Bitcoin as legal tender was another step towards mainstream adoption, said Rene Pomassl, chief executive of Salamantex.
The big question now is how cryptocurrencies will fit into the larger financial ecosystem. “We don’t expect them to replace conventional payment methods, but alongside them,” he says.
Central bankers are retaliating by launching their own digital currencies, but Mr Pomassl says this could further boost crypto assets. “This could encourage retail and institutional investors to view cryptocurrencies as a viable payment option.
“Ultimately, the catalyst for mass adoption will be the integration of crypto into existing payment infrastructures,” he said.
Central bankers have yet to give in, according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“Sir Jon Cunliffe, the vice-governor of the Bank of England, believes speculation has reached such a level that a crypto time bomb is spinning, which could explode in the face of the financial sector,” says she.
Unregulated cryptocurrency assets have grown from just under $ 800 billion to $ 2.3 trillion this year alone, a 200% increase, with danger of contagion if deflated, Ms. Streeter.
The UK’s Financial Conduct Authority is extremely concerned about the collision between social media and the cryptocurrency world, she says.
Kim Kardashian’s only token post earlier this year was the biggest financial promotion in history. Regulators fear that financially vulnerable young investors who are targeted by influencers in the wild west crypto could undermine the stability of the financial system. “
Central bankers have responded by pushing stablecoins, pegged to fiat currencies such as the dollar, but these only account for around 5% of cryptocurrency assets.
The influential Basel Committee on Banking Supervision plans to ensure that financial institutions that venture into cryptocurrencies set aside enough capital to cover 100% of potential losses, Ms. Streeter said.
“This could make cryptocurrency transactions and investments very expensive and limit the number of new institutional entrants.”
She acknowledges that regulators may be reluctant to over tighten, as they could be left behind in the rapidly evolving world of decentralized finance, while others welcome cryptocurrencies with open arms.
Many will regret not recovering Bitcoin during this summer’s lows, but there will be plenty of other buying opportunities, so don’t despair, said Chris Muller, director of audience growth at DoughRoller.net.
“Even after all of the Bitcoin is mined, which will take some time, each can be broken down into one hundred million ‘satoshis’, and there are many more digital coins.”
Mr. Muller suggests investing a regular monthly amount in a cryptocurrency spread. “You’ll go through the ups and downs, but if crypto is successful, you’ll be glad you put all those little portions away.”
Don’t be too hard on yourself if you’ve messed up everything.
“At least you’re in good company with Warren Buffett,” says Mr. Muller.
Update: October 18, 2021 5:00 a.m.