If you look at the major indexes, you’ll see that the stock market is in record territory. This bullish sentiment has also crept into the more speculative digital asset space. The cryptocurrency market is currently valued at $2.5 trillion, near its all-time high.
Call it a bubble if you want. But the monster recent performance of digital tokens, Bitcoin (BTC -0.80%) in particular, can’t be ignored. The world’s most valuable cryptocurrency has skyrocketed 308% since the start of 2023 (as of March 21). And even though it currently sits 9% below its all-time high of $73,750, which was set on March 14, it has soared 61% just this year.
As the months and years pass, there are fewer and fewer investors who haven’t heard of Bitcoin. But there are still lots of investors who don’t own it.
Should you buy this top cryptocurrency while it’s at $67,000? Let’s explore Bitcoin and its prospects even at its near highs.
The perfect setup
Bitcoin’s recent price action is a microcosm of its long-term volatility. Huge price swings, at least when compared to stocks, are normal. But over long periods, this digital asset has certainly soared.
This year is shaping up to be one of the most favorable backdrops for Bitcoin to continue rising in value. There are three key factors investors should know about. A valid argument can be made the anticipation of these events has already helped to propel Bitcoin.
The first development was the highly anticipated approval of spot exchange-traded funds. These investment vehicles not only legitimized Bitcoin as a financial asset in the eyes of regulators and asset managers, but there is now a seamless way for individuals and institutions to gain exposure.
Then there’s the upcoming halving, an event that will reduce new Bitcoin supply that enters the market. Historically, the digital asset has gone on an impressive run in the 12 to 18 months following a halving, as demand outstrips new coin production. This might be the case again.
And finally, there is a lot of talk about the Federal Reserve cutting interest rates multiple times in 2024. It all depends on the trends that play out with inflation. But lower rates and a more accommodative central bank don’t directly impact asset prices. They do, however, encourage savers and investors to seek out riskier holdings to achieve adequate returns. And this could lead to more capital going to Bitcoin.
Bitcoin’s value proposition
It’s important to ask why Bitcoin has any value for people to begin with. I think it’s pretty straightforward.
For the first time in digital form, there’s an asset out there with a fixed supply cap that anyone in the world can buy and hold (assuming they have funds to invest and internet access). Someone in a democracy like the U.S. is accustomed to the developed payments and financial infrastructure traditional banks provide. But someone who operates in a system of weak payments and financial infrastructure under a totalitarian regime like Venezuela could find value in an open, decentralized, and censorship-resistant asset.
And like any other currency, Bitcoin is given worth by its users. As long as there is a demand for Bitcoin, it will remain a store of value.
Nonetheless, critics might say that Bitcoin is worthless, as they point to it being nothing but fake internet money. That argument might make sense on the surface. Still, there’s a reason that Bitcoin has continued to bounce back from lows to reach new highs, despite all of the adverse geopolitical, macroeconomic, and industry-specific events that have occurred over the past 15 or so years. It has proven resilient, and people all over the world have shown a heightened interest in wanting to own it.
The best time to have purchased Bitcoin was in 2009. The second best time is right now, while it’s at $67,000. There is still plenty of upside in the next decade and beyond.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
