Is Bitcoin A Good Investment? No, Bitcoin is not a good investment in 2022, it is potentially the best investment.
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Is Bitcoin A Good Investment ?
The price of Bitcoin in Q4 in 2021 and Q1 2022 was significantly down on the previously achieved highs, however, there are still many analyst’s out there who are calling the next high for bitcoin to peak at around $100,000 USD.
This aside, however, the reasons why Bitcoin is the investment of the year in 2022 are real and easily explained. Let’s get into them.
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Is Bitcoin A Good Investment ? Bitcoin is Becoming a Safe Haven Asset
For a long time people have attributed the name to Bitcoin of being Digital Gold. While this appellation can easily be challenged by the historical price movements thus far, it doesn’t change the fundamental use cases of the underlying asset are consistent with the name.
History doesn't repeat, but it does rhyme. - Mark Twain
This delay in Bitcoin rising to the occasion as a safe haven asset class is partly due to the initial widespread skepticism of the crypto-space. However, more broadly speaking, it is also due to the economic conditions in which Bitcoin was born. Namely, that interest rates were at historical lows for years in order to stimulate growth and de-inflation was the concern central banks were grappling with, not inflation as it now is over 10 years later.
The takeaway in that case is that, just because Bitcoin didn’t have the opportunity to prove itself as a safe haven, doesn’t mean that it isn’t one.
Furthermore, the landscape for Crypto today has changed significantly since those early days in the height of the Global Financial Crisis (GFC). This is for several reasons, but one of the most significant ought to be that the mean age of the average investor in Bitcoin is changing. This signifies that there are more and more youth every year who are holding Bitcoin, and less and less old school investors who still look at the asset with skepticism and doubt.
The effect of this is that the overall perception of the riskiness of Bitcoin has changed.
The younger generations have *literally* grown up with cryptocurrency as being part of their world and Bitcoin in particular being part of day to day life. While it can still be argued that Bitcoin, and Crypto generally, is on the riskier end of the potential asset classes available today, this can largely be attributed to its price volatility and less to its mystery and perceived ‘uselessness’.
Afterall, when you think about it, Gold is also ultimately useless considering that it doesn’t pay a dividend, it isn’t edible or functional in any way. What is does have it that it looks pretty, is indestructible and has a finite supply.
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Statistics on Bitcoin
While the former in terms of Bitcoin may be a matter of opinion, the latter is true. Bitcoin is, from a digital perspective anyway, indestructible and it is also finite in its supply. It is these qualities that caused Bitcoin to be called digital gold in the first place.
As we move towards a more and more digitalsed existence, it goes without saying that we are going to see our investment appetite do the same thing.
Moreover, there are also a few reasons why investors, especially the younger generations would actually prefer Bitcoin to Gold. Firstly, it is far easier to transfer across borders than physical gold and it cannot be confiscated or lost etc. Secondly, it is not susceptible to methods of control such as sanctions, as you don’t need to access it via a bank. Thirdly, Cryptos are not subjected to devaluation as Bitcoin and others is not dependent or directly affected by one particular economy at any given time.
Perhaps the recent history of the world has not made these qualities particularly pertinent, however, as the current geopolitical conflict in Ukraine has highlighted, there will always come a time when these qualities are significant deciding factor for investors as is highlighted by savvy crypto investor Layah Heilpern in the below video.
Currently Ukraine owns 12.73% of the worlds Bitcoin followed closely by Russia at 11.91%. Say no more.
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Is Bitcoin A Good Investment ? Bitcoin is a Hedge Against Inflation
Bitcoin is still in its nascent stage, and while, in theory Bitcoin has always had this capacity of being used as a hedge against inflation the truth is that there were never the market conditions to confirm or disprove this claim.
As a result, this quality was little known and discussed only in theory, usually by those who truly understood the abilities of the cryptocurrency.
The above video featuring the accomplished economic historian and analyst Lyn Alden outlines in excruciating detail the historical background to this claim.
Considering that inflation can be so damaging to the average person when they lose purchasing power through the inflation rate, Bitcoin is the obvious choice for people seeking to protect their ability to engage in the economy. This is in particular related to the poor and middle class who would usually not have access to stocks and the bond markets due to financial barriers to entry.
As Lyn highlights, the 1970s economic conditions in the US as a potential blueprint upon which we can consider how the next chapter in world history will play out. Of course there are significant differences between now and then, considering the developments in technology which have affected everything that we do and how we do it.
Furthermore, one key difference to have taken place over recent decades is that, previously, a incident of inflation would have been contained to one specific economy and therefore currency. However, in the modern globalized world, there is no way to separate one debt cycle crisis from another, as all economies are so intertwined.
This means that previously investors would have been able to flee a sinking currency in favor of another, whereas today this is not possible. The logical alternative? To turn to the new global reserve currency, Bitcoin.
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Is Bitcoin A Good Investment ? Bitcoin is Now Legal Tender
According to the anonymous Bitcoin investor and analyst, Plan B, Bitcoin has just crossed the threshold from uncertain asset, to commodity type investment class.
This would mean that instead of the value of Bitcoin falling when interest rates rise, we will see an opposite effect. He expects that there will be a correlated yield curve relationship, meaning that as interest rates increase rise, so does the price of Bitcoin (to a certain ratio).
Furthermore, Bitcoin is now being taken seriously by huge institutional investment houses and hedge funds, however, many are still severy miscalculating the innate behaviour of the Crypto market including Bitcoin.
To further bolster this superiority as an asset, El salvador has been the first country in the world to adopted Bitcoin as legal tender. The result of this has been a 30% increase in tourism in the country and a double digit jump in GDP. The expected result of this is that it will lead the way for other larger countries to adopt the currency as a legal tender as well, such as Mexico and Brazil.
Plan B goes on to say that Bitcoin is too big and significant now to be banned by governments around the world and it is much more likely that it will be further accepted and therefore taxed accordingly as with gains made in other asset classes.
So, according to Plan B, due to the scarcity, portability and un-debasability of Bitcoin these are the fundamental qualities that have seen it cross the line between online virtual currency, and now, adoption as legal tender.
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