For the casual follower of the space, cryptocurrency price developments must at times look like pure insanity. A hype-fuelled bubble in 2017 was followed by the much-predicted major crash in 2018. Prices of most cryptocurrencies dropped anywhere between 75-99%. For many crypto-haters this was confirmation of what they had suspected all along: the whole sector is built on thin air, it’s the Tulip mania of the 21st century.
Yet, what followed then was rather unexpected. Prices, Bitcoin in particular, bounced back strong since the beginning of 2019. Once again, Bitcoin becomes the topic of dinner table conversations with many people wondering if they should have bought, should buy now or stay well away from this market.
The answer to whether now is a good time is loud and clear: Right now might well be the last chance to buy Bitcoin and hope for significant returns in the future. With the confirmation of Bitcoin’s price rebound, not buying Bitcoin looks like as big a risk in terms of opportunity costs as buying it, at least as long as you do not invest more than you can afford to lose.
Here are the main reasons for why now is a good time to buy, maybe not any Cryptocurrency, but certainly Bitcoin:
- Immutability, Censorship Resistance, Easy Transferability: As famous entrepreneur and Angellist founder Naval Ravikant famously wrote, “imagine a Swiss Bank Account that’s immune to pressure but has limited space. New depositors have to buy space from existing ones.” That’s Bitcoin. If Bitcoin continues its journey towards ‘Digital Gold’ status, it’s value is likely to increase substantially. Gold’s market cap today is $8 trillion versus Bitcoin’s market cap of $184 billion – that’s a 43x potential upside. If Bitcoin was to claim even a small role as a Global Reserve currency, the sky is the limit. Is that likely? Maybe not – but if it was obviously going to happen, investing in Bitcoin would have long ago stopped being such a good opportunity because other investors would have already bought it up
- Resilience: Traditional financial market players look at an asset that loses >80% of its value as essentially dead. As any crypto trader knows, Bitcoin survived such drops 3 times. It is becoming harder and harder to argue that Bitcoin is not here to stay
- Institutional Adoption: It might come as a surprise to someone outside of the crypto space, but the Operator of the New York Stock Exchange, Intercontinental Exchange, is launching a platform, Bakkt, for physical delivery Bitcoin futures contracts i.e. futures that are actually backed by underlying Bitcoins. Regulated and run by a well-respected operator, this is opening the door for very large institutional investors. In related news, Harvard University’s Endowment Fund has been investing into Crypto projects
- It is not too late: Research house Fundstrat estimates that there are approximately 50 million holders of Bitcoin with around 2 million holders who have at least $1,000 invested. There are over 225 million PayPal and over 4.7 billion VISA/Mastercard accounts. Only 21 million Bitcoin will ever be produced. The potential upside is still large if you invest in the near future
So should you buy? From a risk/reward point of view, putting in a manageable monthly amount into Bitcoin for a period of time does seem like an excellent opportunity. While Bitcoin’s continued success is far from certain, the possibility that it reaches its full potential could still mean significant profits for those starting to invest today.
Finally, the curious reader might be wondering: should they buy Bitcoin or other, so-called Alternative Coins (Altcoins)? For the casual investor, buying Bitcoin is what makes the most sense. Not only does it dominate the market of cryptocurrencies, making up 68% of total cryptocurrency market capitalization, but it also has by far the strongest brand recognition, the strongest claim to being decentralized, no obvious ‘leader figure’ and the largest community. If you are a more seasoned investor looking to explore Altcoins, take a look at these predictions and remember the number one lesson about crypto investing: Always Do Your Own Research!
Printed with permission of the author. Oleg Giberstein is Co-founder and COO of Coinrule, a Smart Assistant that helps traders to build automated trading strategies in an easy interface. Nothing written in this article constitutes Investment Advice, Coinrule is open for trading on https://coinrule.io