After shedding almost two-thirds of its value in 2022, the cryptocurrency market has gained about 36% so far this year (as of the morning of Feb. 27). With the turn of the calendar, investors appear to be warming up to the asset class once again.
According to coinmarketcap.com, there are currently over 22,000 various tokens out there. But in my opinion, only one of them reigns supreme. Amid the cryptocurrency bull market, here’s why Bitcoin (BTC -0.10%) remains the best digital asset to buy. And it’s not even close.
What about the other tokens?
There’s no doubt that other popular crypto networks out there, like Dogecoin and Shiba Inu, have skyrocketed in short order and made some lucky people very wealthy. The issue, though, is that these dog-inspired meme tokens lack any real-world utility. They are mainly used as a tool for risky financial speculation.
Then there’s the more promising blockchains, like Ethereum, Cardano, and Solana. All of these smart-contract-enabled cryptocurrencies are trying to solve various problems, but the most important is that they could disrupt entire industries by removing costly and inefficient middlemen. With decentralized finance protocols, the business of saving and lending is a prime target.
However, I’m not convinced just yet. These projects have security and network issues, can become increasingly centralized because of their proof-of-stake consensus mechanisms, have complex and often delayed technical development pipelines, and are controlled by small groups of people. So far, the progress (or lack thereof) hasn’t been anything to write home about.
Bitcoin has compelling characteristics
With a succinct explanation of why I’m not too interested in any other cryptocurrency out of our way, let’s direct our attention to Bitcoin. It’s the oldest cryptocurrency at 14 years of age, and the longer Bitcoin remains relevant and survives, the greater the likelihood that it isn’t going anywhere.
I believe that Bitcoin’s boring nature, or its simplicity and lack of complicated features, are actually an advantage. Moreover, Bitcoin isn’t controlled by any one person or small group of people that can alter its fixed eventual token supply of 21 million. This trait cannot be understated.
But most importantly, I think Bitcoin is helping to solve two incredibly massive problems our world faces today. First, and more directly, Bitcoin is trying to fix money. We’ve seen governments continue to run up huge budget deficits and major central banks pump money into economies for the better part of the past 15 years. Even though interest rates have been on their way up in the U.S., because our country’s debt burden continues to soar, it will only be a matter of time until the Federal Reserve reverses course. And the result could be stubborn inflation that is above the 2% target.
Having a place to store wealth that isn’t controlled and manipulated by politicians is one of Bitcoin’s purposes. And if we zoom out, it’s hard to find a bigger total addressable market than money itself.
Additionally, and in an indirect fashion, Bitcoin could help steer the world toward sustainable and abundant energy. Many naysayers point to the network’s proof-of-work mining system and its energy use as a major burden. But the reality is that Bitcoin mining can be set up anywhere, providing a way to monetize surplus energy that is often wasted. Plus, this can actually incentivize increased investment in clean energy because there will always be a use for it.
Bitcoin’s potential is that it will one day not only be a sound version of money, but that it results in abundant energy for the world. These are undoubtedly two of the most important problems we face.
Positive price action
At its 2022 low of under $15,800 in November, Bitcoin was 76% off its all-time high. But so far in 2023, the world’s top crypto has soared 41%. And although it is up 139% over the past five years, the recent price action could be the beginning of a higher positive uptrend for Bitcoin.
Thanks to a key event, called a halving, the reward that miners receive for processing transactions and securing the network is cut in half roughly every four years. The next halving is expected to happen in April 2024. Bitcoin’s price usually marches higher in the period before and after this important event. This means that now could be a good time to get bullish on Bitcoin.
Neil Patel has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.
