As attractive as cryptocurrencies can be, they are risky. While the blockchain technology powering these assets is innovative and has the potential to transform the financial world as we know it, their role in the future remains ambiguous and borderline unclear.
Yet there is one cryptocurrency with a proven role that offers investors the safest exposure to the best that the cryptocurrency market has to offer. This is why I buy Bitcoin (CRYPTO: BTC) like there is no tomorrow.
1. The halving effect
On April 19, Bitcoin underwent its fourth halving. Halvings, which occur approximately every four years, are the foundation of Bitcoin’s robust monetary policy, which prioritizes preserving scarcity value by cutting inflation in half. With the fourth halving over, Bitcoin inflation is now just 0.85%. That makes it less inflationary than what many consider the superior store of value and inflation hedge: gold.
In the long term, it is easy to see how continued reductions in inflation will benefit Bitcoin price growth. Should demand for the cryptocurrency continue to rise, declining inflation will put more pressure on the finite supply of 21 million coins. Add all this together and you have the perfect recipe for price increases.
Even in the short term, the effect of the halving makes Bitcoin a viable investment today. In the years that a halving takes place, Bitcoin grows by an average of 125%. Measured from the beginning of the year, the price would be just over $100,000, meaning there is still generous return potential today, even at a price of roughly $65,000. Yet the best that Bitcoin has to offer usually occurs in the year after a halving. Historically, Bitcoin has risen over 400% during these years.
2. Greatest institutional interest and clearest role in the financial landscape
For most of Bitcoin’s existence, its rise to the top has been driven by retail investors. But now things are about to change. With the adoption of spot Bitcoin ETFs, institutional investors with huge capital reserves can easily invest in the cryptocurrency. Now that Wall Street’s biggest names have arrived, this will likely put exceptionally more pressure on Bitcoin’s limited supply, the likes of which it likely hasn’t seen since its early days.
Semi-related: The fact that Bitcoin was even approved for a spot ETF is an indicator of the market’s current perception of it and its role in the financial landscape. Let’s consider that for example Ethereum (CRYPTO:ETH), the second most valuable cryptocurrency, is in the midst of an intense debate over ETF approval as regulators try to determine whether it is a security or a commodity. If this conversation is made about Ethereum, you can guarantee that every other cryptocurrency will be questioned in a similar manner.
Now, I’ll be the first to admit that just because the Securities and Exchange Commission (SEC) thinks a cryptocurrency is a security doesn’t mean it’s the end for any given blockchain. Most of these assets are fairly decentralized and would continue to function even if the SEC filed a lawsuit. Please note that cryptocurrencies are traded internationally and are not subject to the laws of any specific country.
However, markets don’t like the idea of regulatory risk. That’s why Bitcoin is such a safe investment today. The SEC has already deemed it a commodity and out of its control. This gives the company unique staying power and an additional layer of insurance so that it is not hampered by regulatory scrutiny.
3. In a class of its own
In a similar vein, Bitcoin has generated significant institutional interest and has a distinct place in the financial landscape due to its core characteristics, which make it unique compared to virtually every other cryptocurrency.
When you invest in Bitcoin, you are investing in the most decentralized, secure and proven cryptocurrency on the market. There is no single group that oversees its activities. We don’t even know who made it. All we know is that its creator went by the pseudonym Satoshi Nakamoto and has since disappeared.
No other cryptocurrency can claim this. Just about every other cryptocurrency has a well-known creator and a team of developers who maintain their functionality, making them much more likely to fall within the purview of the SEC.
Conversely, Bitcoin has functioned more or less in its original form for the past fifteen years, without any central figure or authority. In other words, even if the SEC wanted to take action against Bitcoin, it wouldn’t be able to. Who would sue? The creator of Bitcoin is unknown and it runs on the most decentralized network with thousands of nodes around the world.
Final thoughts
When you put it all together, I dare say there is never a bad time to invest in Bitcoin. Are there better times than others? Certainly. Investing in the depths of the crypto winter should yield better returns than investing at the top. However, data shows that as long as investors hold on long enough, even if you buy at the top, you will still earn generous returns in the long run.
As fiat currencies continue to inflate, institutional interest continues to grow and halvings continue, Bitcoin is poised to continue to exceed expectations and show why it is unlike any other asset. Michael Saylor, notable Bitcoin investor and CEO of MicroStrategy (which owns about 1% of the total Bitcoin supply), it might say it best: “I will buy at the top forever.”
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RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
3 Reasons to Buy Bitcoin Like There’s No Tomorrow was originally published by The Motley Fool
