In case you missed it, Bitcoin (CRYPTO: BTC) has been on an absolute tear. Following the recent US election in which pro-crypto candidate Donald Trump won the presidency, Bitcoin has risen more than 30% since election night and recently surpassed $90,000.
The cryptocurrency’s performance has undoubtedly captured the attention of seasoned investors and newcomers alike. But with Bitcoin trading so high, it’s only natural to wonder: Is it still a good buy today?
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Conventional wisdom says that buying at record highs is a risky endeavor. But there are two compelling reasons – one for the short term and one for the long term – that suggest Bitcoin could still be a good buy.
At first glance, Bitcoin’s climb to $90,000 could indicate that the rally is over, leaving latecomers feeling like they missed out. However, this is not the case.
An often overlooked indicator, Bitcoin perpetual futures funding rates, tells a different story. This may seem like a technicality, but understanding funding rates can help investors gauge the sustainability of Bitcoin’s current rally.
Financing rates are periodic fees exchanged between traders who take long (buy) and short (sell) positions in futures markets. Their goal is to keep the futures contract price close to the actual spot price of Bitcoin.
When the funding rate is positive, long positions pay a fee for short positions, indicating there is more demand to bet on price increases. Conversely, negative interest rates mean that short positions are paying out for long positions, indicating that bearish sentiment is dominating.
Increased funding rates generally indicate a highly leveraged market, where many traders are taking long positions with borrowed money. Historically, Bitcoin’s price has experienced local spikes when funding rates rise, as these leveraged positions become susceptible to liquidations during any price correction.
However, as you can see from the chart above, this is currently not the case. Data shows that even as Bitcoin reaches $90,000, funding rates remain low, indicating that the recent price surge not driven by excessive leverage. Instead, the rally appears to be fueled by organic buying rather than speculative trading.
This healthy market structure is a positive signal. A rally led by real demand and not leverage leaves room for additional price growth, with less risk of a quick correction due to a wave of liquidations. Simply put, Bitcoin’s current price action indicates that it has a stable base for continued gains, and the climb to $90,000 was just a sign of things to come.
When it comes to Bitcoin’s long-term potential, its appeal goes far beyond its recent price action. As the most decentralized, secure and finite digital asset, Bitcoin is unique in the investment world.
Its scarcity and resistance to manipulation make it stand out as a ‘digital gold’ in a financial landscape where certainty is increasingly difficult to obtain. As global economic instability and inflation concerns persist, Bitcoin’s built-in scarcity – forever limited to 21 million coins – positions it as a hedge against the ever-growing supply of fiat currencies.
Furthermore, Bitcoin’s decentralized design makes it immune to the kind of centralized control that plagues traditional financial systems. Unlike government-issued currencies, which are prone to devaluation due to excessive printing, Bitcoin’s value is not dependent on policy decisions or inflationary pressures.
Instead, the value proposition is based on a reliable supply limit and an open, secure network. This makes Bitcoin not only an inflation-proof store of value, but also a tool for economic autonomy, giving people a way to preserve wealth independent of the conventional financial system.
Amid growing global debt and a system increasingly dependent on intervention, Bitcoin’s properties offer a kind of financial sovereignty, an escape from the fragility of centralized systems.
As these qualities become more widely recognized, demand grows, as evidenced by Bitcoin’s recent rally. However, this momentum can only be a sign of what lies ahead. As adoption spreads, institutions increase their involvement, and regulatory clarity improves, Bitcoin’s core strengths are likely to gain even more traction.
MicroStrategy (NASDAQ:MSTR) CEO and Bitcoin advocate Michael Saylor put it best when he said, “I will buy the top forever.” His statement captures the essence of what Bitcoin has to offer. It’s not about chasing short-term profits; it’s about retaining value in a superior asset for the long term.
While Bitcoin may offer potential for short-term gains, it has historically rewarded patient, long-term investors. As more people come to recognize these enduring qualities over time, Bitcoin’s long-term growth potential remains unlike any other asset in the market today.
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RJ Fulton has positions in Bitcoin. The Motley Fool holds and recommends positions in Bitcoin. The Motley Fool has a disclosure policy.
Bitcoin Hits Another All-Time High, But Is It Still a Buy Today? was originally published by The Motley Fool
