The most expensive cryptocurrency in the world is about to surpass its previous record high.
With a gain of about 90% as of July 13, Bitcoin (BTC -3.52%) has had a wonderful start to the year. With this pattern, the bulls are undoubtedly pleased, especially after this digital asset fell 65% in 2022. It seems investors are now more upbeat as the crypto industry as a whole recovers.
The price of bitcoin is currently about $31,400, which is still much below its high price of around $69,000 in late 2021.
Does that imply that purchasing this popular cryptocurrency while it is still under $40,000 is a wise move? Let’s examine the specifics of why I believe it could be.
The halving in 2024
Bitcoin uses a proof-of-work consensus algorithm, which means that in order to process new transactions on the blockchain, Bitcoin miners must first successfully solve challenging computational puzzles. Newly minted Bitcoin is the payoff for all of this work. The current block reward is 6.25 coins. The payout is reduced to 3.125 coins at some point, possibly in April 2024. This occurrence, known as a halving, happens every four years or so.
The price of Bitcoin has often increased beginning many months before a halving takes place, even if the past is no guarantee of what the future may bring. Even 12 to 18 months after a halving, this rising trend is still present. So, it could be a good idea to buy right now.
This makes sense as halving effectively slows down the rate at which Bitcoin’s supply is expanding. Economic theory at its core predicts that a decrease in new supply combined with an increase in demand would result in a higher price. There will be only be 21 million coins available for use in circulation. A supply cap that is hard-coded in like way might spur interest.
The price history of Bitcoin may be compared to a roller coaster. Multiple times during the course of Bitcoin’s 14-year history, price losses of more than 50% have occurred.
Although there is no question that the volatility has decreased as the asset’s market valuation and popularity have grown, Bitcoin still trades like a speculative growth tech stock.
But there is one thing for sure. Although not always in a straight line, Bitcoin has always managed to experience greater highs and lower lows throughout time. I believe that it is possible that Bitcoin will surpass its previous all-time high after the subsequent halving event in 2024.
Expect higher adoption
When, if ever, Bitcoin will emerge as a significant means of exchange that is widely accepted around the world for everyday transactions is difficult to predict with any degree of accuracy. Simply said, there is a lot of ambiguity surrounding this result.
The strongest investment case for Bitcoin, in my opinion, is its growing popularity as a store of wealth. This means that rather than being used for its functionality, Bitcoin will be utilized because it can help people keep or, ideally, considerably increase their savings.
Bitcoin’s volatility is undoubtedly heartbreaking, but it’s difficult to discount its long-term success. The price of Bitcoin has increased by over 50,000,000% from April 2011 (the oldest data on CoinMarketCap). The S&P 500 and the Nasdaq Composite index performance are totally destroyed by that by a wide margin.
Additionally, just 29% more has been paid for an ounce of gold throughout the same time span. The wealth-building performance of Bitcoin has been demonstrably superior based on this data.
Over the next five to ten years, Bitcoin’s price may increase even more as more market participants, particularly institutions, begin to feel secure adding it to their portfolios. BlackRock and Fidelity, two major asset managers, are attempting to introduce a spot Bitcoin exchange-traded fund.
It is advisable to purchase Bitcoin while it is still under $40,000 since such interest is encouraging for the future of the cryptocurrency.
