Bitcoin
Down 9%, Is Bitcoin a Once-in-a-Generation Investment Opportunity?
This booming cryptocurrency is an attractive long-term portfolio.
Despite an extremely volatile journey over the last five years, Bitcoinin (Bitcoin -1.96%) the price shot up 1,190%. It has benefited greatly from more optimistic sentiment over the past year and a half.
But after reaching a new all-time high of nearly $74,000 in March, the world’s most valuable cryptocurrency has taken a break. On April 24, it was 9% below the maximum price. This drop follows the broader cryptocurrency market.
The current configuration does Bitcoin a once-in-a-generation investment opportunity?
Why is Bitcoin worth owning?
It’s important to take a step back and first consider what makes Bitcoin such a unique asset. It clearly has something going for it that has helped drive the price up a lot in recent years.
Before the arrival of Bitcoin, there was no way for two people to send money digitally to each other without the use of intermediaries. Just think of all the different parties involved in an online transaction today, and they all get a cut. The pseudonymous founder of Bitcoin, Satoshi Nakamotowanted to develop a decentralized monetary network that transcended borders and was open to anyone.
Additionally, perhaps Bitcoin’s most valuable feature is the fact that it has a fixed supply limit of 21 million. As the demand to buy and hold this digital asset has increased over time, it is no surprise that its price has also increased.
A completely decentralized network with a supply cap has tremendous value in itself. Just look at the current monetary system. In the USA, for example, we have a currency that is constantly devaluing, as well as an increasing debt problem. Bitcoin is an alternative to this financial ineptitude.
Over time, a greater number of market participants and greater reserves of capital are learning more about Bitcoin’s attractive qualities. And that raised its price. The recently approved and launched spot exchange-traded funds have also opened the floodgates in terms of institutional involvement.
Should you wait for a better entry price?
After such an impressive run, investors are probably wondering how much more upside Bitcoin has. I believe there is still some serious potential to achieve returns that beat the broader stock market.
According to Unchained Capital, a financial services company focused on Bitcoin, only 1 in 4 adults in the US own any Bitcoin. This compares to more than 60% who own shares. I suspect that in developing countries Bitcoin penetration is substantially lower. As more people educate themselves, they will likely want to get some exposure.
Because Bitcoin’s main use case is as an excellent store of value, it often draws comparisons to gold. The value of all the gold extracted from the Earth is estimated at almost 16 trillion dollars. Given that Bitcoin has properties that make it superior to goldIt is entirely reasonable to assume that one day, the digital asset’s market capitalization, now at $1.3 trillion, could match or even exceed that of the precious metal.
I believe that 10 years from now the price of Bitcoin will be significantly higher than it is today. And if history is any indication, we may not see it fall much below where it currently trades. This means that investors should look to buy the crypto on the dip.
But to be clear, I also think it’s a smart idea to consider dollar-cost averaging in Bitcoin. If this is an asset you plan to own for an extremely long period of time, taking advantage of multiple pricing could be worth it. Just be mentally prepared for the inevitable volatility.
Neil Patel and its clients do not have a position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The motley fool has a disclosure policy.