Many investors want to know is bitcoin good investment or not during the Coronavirus outbreak. However, in 2020, Bitcoin is not dead. Its value might not stick near $20,000 level, but BTC still has its own value. This section includes the history of Bitcoin along with its possibility of future price direction. Let’s find out!
13 March 2020 | AtoZ Markets – Booms and busts, this is what investing in Bitcoin is all about. Bitcoin value dropped drastically from $10k to $5k as the COVID-19 Corona Virus looms out. Bitcoin has a market dominance of 65% with a market cap of $103 Billion. Following the bearing trend, almost all the altcoins dropped massively due to the pandemic.
Is it a good time to invest in Bitcoin (BTC) for the long term?
Investment is a process to buy an asset that creates products, services or cashflow. Like you can get benefitted from a profitable business or a rentable real estate as an investor. Investment has an intrinsic value that makes it worth owning from a financial perspective.
Before proceeding further about Bitcoin, we need to know the usefulness of the technology called “blockchain”. Blockchain is a simple software invention, whereas Bitcoin is a way to use it. Besides, there are many things that dependents on blockchain technology.
Blockchain is a computer protocol that allows people to make transactions without knowing each other or the network between them. The transaction might be the monetary value or any important information. The main attraction of the Blockchain technology is that there is no middle man intervention while making transactions.
Rising of Bitcoin
Let’s start with the basics of Bitcoin for those readers, who aren’t familiar with it.
Bitcoin is a popular cryptocurrency. It’s is a program that runs by a network of thousands of computers. Bitcoin uses cryptography to secure the transaction. The technology behind the overall system is called the blockchain.
Some projects regarding virtual currencies have been taken in the late 80s, but they all have failed. Bitcoin was the currency, that managed to solve the trust issue. In the traditional world, the Government controls the money. On the other hand, Bitcoin is governed by math.
The Bitcoin has started to run from January 2009. The creator of Bitcoin, Satoshi Nakamoto, is a pseudonym, whose identity is unknown till now. Nakamoto left the Bitcoin project early and later on it has been developed by a decentralized group of volunteers and organizations.
For several years, Bitcoin was unknown by everyone. Later on, It started to gain people’s attention in 2015 and hit the mainstream in 2017. At that moment the price of Bitcoin has risen to 20,000$ from 1000$. After that, the market started to show bearish momentum.
The Basic of Investment in Bitcoin
For investing in Bitcoin, you can buy both Bitcoin Cash (BCH) or Bitcoin Core (BTC). Both of them are separate digital currencies, and you can buy or sell them online.
There’s no specific definition of investment in Bitcoin. For instance, you may like to invest in Bitcoin by buying it to store or trade, or you may invest in setups to get involved with Bitcoin mining. However, in any of the investments, you should do research before spending money on Bitcoin. Additionally, you should make sure that you never spend more than you can afford to lose.
Both Bitcoin Cash (BCH) and Bitcoin Core (BTC) have a high level of volatility. The reason behind the fluctuation is that both instruments are very new in the world, and market sentiment still not established like other instruments.
Predicting Bitcoin price is often hard for experienced traders due to the lack of history. Therefore, you should be careful about the research and learning of Bitcoin.
Why Will People Invest in Bitcoin?
If you read the above section of this article, you probably know what Bitcoin is and why its price is very volatile. The next logical question arises: why People will invest in Bitcoin?
We all know that Bitcoin is a new asset class. People did not see something like that before in Financial markets. Still a small portion of the world knows about the Bitcoin. However, Bitcoin is more than just an asset. It is not like an ounce of gold or a stock of a company. Bitcoin carries its value as a currency and technology.
When an investor understands this, he may see the light and understand what the Bitcoin investment really means. It is like having a piece of the internet in 1995 or a mobile phone in 2005.
Many people didn’t buy Bitcoin in mid-2017 when the price of it moved from 1000$ to 3000$. It was impossible for them to believe that its price may rise. However, six months later, it went to 20,000$. Now the price is hovering around 7000-9000$ range.
Is there still a possibility of growth? Yes, there is.
Many people consider Bitcoin as a digital gold due to its store of value. Despite the volatility, Bitcoin has been a far better investment than anything in the past ten years. If Bitcoin gets established in the market, you would be the one to get benefitted from it.
Future Growth of Bitcoin
All of the writing above is enough to know the probabilities of Bitcoin to come in the limelight in the coming years. However, it is easy to see a good investment in hindsight, but there are more things to know.
In early 2019, a pseudonym ‘Plan B’ published an important article ever on Bitcoin. It was the primary phase when the price action of Bitcoin was adequately modelled. Plan B showed that the so-called Stock-To-Flow (S2F) explains the price movement of Bitcoin and found a 99.5% correlation for his model.
There is just one element in the world that has a high S2F is Gold. It is not surprising to hear that the Gold has been the simplest performing asset (multiplied by 15 from 100$ to 1500$) during this century or it had been before Bitcoin came along.
A high S2F is merely possible when a yearly replacement production of the particular asset is very small compared to the prevailing stock. This is often exactly how Bitcoin works. The key thing is that unlike all fiat currencies, Bitcoin’s inflation goes down. This is often named as a halving.
Every four years, the number of latest Bitcoins being minted every day is cut in half. This is often a huge deflationary hit because the demand is usually slowly growing. The subsequent halving takes place in May 2020. the most important booms in Bitcoin history have always happened within the 1-2 years following the halving.
Hence, the subsequent Bitcoin boom should happen in 2021-2022. PlanB and lots of other analysts expect Bitcoin to succeed in 50,000-100,000$ prices by then.
So do you still think that 10,000$ Bitcoin is expensive?
For every investment, the investor should think of why he would invest before thinking how. Therefore, it is important for an investor to understand how Bitcoin works before investing any money in it.
Bitcoin remains new, and it can take months to know what positive impact Bitcoin can give to the people of the world. Take a while to understand Bitcoin, how it works, the way to secure bitcoins, and how Bitcoin differs from paper money.
In every investment diversification is the key to remain in the industry. Therefore, you are not suggested to invest all of your savings in the Bitcoin hoping that it will double or triple your investment in the next few years. As Bitcoin is new, you should invest amounts that you are ready to lose.
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