Bitcoin is a form of digital money. Bitcoin is not backed by a central bank or government like fiat currencies, which are currencies backed by the government. Bitcoin's value comes from the fact that its underlying technology is safe and that the number of Bitcoins that can ever be made is limited to 21 million. Its price on the exchanges is set by demand and supply, just like stocks.
Anyone with a Bitcoin wallet and an internet connection can buy or sell Bitcoin in places where it is legal to do so.
Bitcoin and other cryptocurrencies use blockchain technology to make transactions anonymous and safe, which isn't possible with traditional currencies. Even though Bitcoin is not risk-free, many people who are interested in cryptocurrencies see Bitcoin and other similar currencies as the future of money.
Since so many computers check every Bitcoin transaction, the Bitcoin blockchain is thought to be very safe and hard, if not impossible, to change. All of the history of the blockchain is available to the public. This makes it easy for Bitcoin users to agree on the state of the network.
But that doesn't mean that you don't have to worry about the safety of your own bitcoins. You can make it less likely that you'll be scammed or hacked by choosing a Bitcoin wallet or a combination of wallets that strikes a good balance between ease of use and security.
Software: Wallets that are linked to the internet are called "software wallets." They are the easiest to use and may be free to make, but hackers are most likely to be able to break into them.
Hardware: Hardware wallets are physical devices that are harder to use but offer the most security.
The Federal Reserve has been printing a lot of dollars over the past year or two, which has led to inflation of 8.3%. Therefore, 8.3% inflation is undesirable on its own, but there is a chance that the figures are not entirely accurate. It's important to understand how inflation functions. Inflation is essentially the depreciation of the US dollar or any other dollar or currency value. However, since the US dollar is the subject of this discussion, it is effectively dying at a rate of 7% annually. So if you spend $100, you will have $93 the following year. Additionally, there is a huge economy in our current market, and the measure of inflation is not exactly accurate and businesses have begun to realize this. As a result, this is what is known as "Shrinkflation”. Shrink Inflation occurs when prices stay the same but what you get for that money is actually less.
Consequently, Costco and a few other big-name retailers maintained their prices in a similar manner throughout the pandemic. Since the amount they were actually giving you decreased, there was real inflation even though that didn't manifest as inflation. Additionally, inflation does not take into account asset prices such as your home's value, stock markets, etc.
Bitcoin enters the picture here because it was created with the intention of having a fixed annual rate of inflation that actually decreases year after year while becoming increasingly difficult to produce. Because there can only ever be a certain number of Bitcoin, the algorithm basically gets tighter and tighter. As a result, if you compare it to gold, there is only so much of that precious metal left in existence. As soon as you start searching for gold, creek beds and similar objects are very simple to mine. But once you've picked the easy pickings, getting x becomes harder and harder and harder until, eventually, blasting out mountains to define some gold. Bitcoin uses a similar sort of idea, but from a digital perspective.
Therefore, because it is designed to be regulated by inflation, an inflationary environment has many of the characteristics that you would desire in an investment, whereas our current inflationary environment is very unregulated. From that perspective, I believe it is really ideal for the environment we are in right now.
It has been among the best performing asset classes over the past ten years. Yes, there has been a lot of growth that we've missed. It has returned about 1,000,000% over the last ten years, which is insane. But even so, it's only just getting started. Therefore, it still has a lot of performance to come. And that's why many analysts believe that Bitcoin could reach million-dollar-plus coin status within the next 5- 10 years. It has a lot of growth potential, especially when compared to things like the stock market where you know, Bitcoin is at its low value and infancy.
According to some studies, Bitcoin could reach $10 million over the next 10 years. Therefore, whether it was up earlier or down 50% today, it's really even. Any of those values that continue to place us below where we ought to be valued. Bitcoin is extremely undervalued in comparison to where it ought to be. In that regard, the valuation is favorable. Because of this, it may be a really wise investment from many points of view. Remember that this is an investment and that there is no way to predict the future, so enter the investment with your own valuation viewpoints. Having said that, I believe there is a lot of potential, whereas the upside potential of many other asset classes in the current environment is very low.
The third factor is Bitcoin adoption, which somewhat relates to the earlier comment about valuation. The adoption of Bitcoin is still in its very early stages. More institutional players, aka the big boys with lots of money, have started dipping their toes in Bitcoin over the past two years. For instance, Jack Dorsey of Square Cash and Jay Z began putting a significant amount of their financial resources into Bitcoin. This occurs because endowments, such as those for universities, are investing in cryptocurrencies, particularly Bitcoin, as an alternative to holding this cash. Other reasons include student hedge funds entering the market. What does it mean when there is a lot of money chasing a limited supply of resources or Bitcoin? Prices increase. Consequently, as more and more big players or institutions adopt the technology or show interest in it, the price will only continue to rise. Due to this, money will continue to chase after the limited resource. Institutional buying will therefore likely have a significant impact on the market. And I think you're just beginning to see the very tip of the iceberg.
Other examples include municipalities and even whole nations showing interest in using Bitcoin as real money. Miami has made significant progress towards adopting Bitcoin as a legitimate form of payment, and other South American nations that have experienced severe inflation problems now do the same.
As another illustration, Bitcoin is now essentially used as the primary method of payment in El Salvador. They have thus addressed inflation. Due to the extreme inflation we are currently experiencing in the United States, having a non-inflationary asset, or at the very least some fixed deflationary asset, like Bitcoin, makes it very, very appealing to many of these countries. As a result, I can see other nations taking this route in the future. Therefore, the longer Bitcoin survives, the better. As more and more countries buy into it, so does institutional money.
Many people believe it to be extremely complex and lack understanding of how cryptocurrency markets, posts, etc. operate. However, investing in Bitcoin is now incredibly simple thanks to platforms like Gemini CoinBase and others. Swan Bitcoin and CoinBase have both done a great job supporting Bitcoin, particularly from a $1 cost-averaging perspective.
If you're not familiar with the idea, dollar cost averaging essentially enables you to make purchases at predetermined, predictable intervals. As a result, you can continue to buy even if the price increases or decreases. For instance, Swan Bitcoin and Coinbase allow you to trade $5 to $10 per day when the price is down and you are buying into the price being down. So, if you're just getting started with the best thing, you could invest in Bitcoin in place of one cup of coffee. And simply carry out that action repeatedly. Making investments super easy with platforms like Swan Bitcoin and Coinbase is a great way to get started investing in Bitcoin quickly and easily. Before you know it, you're starting to accumulate a ton of it.
Bitcoin is a sort of antidote to a lot of the political unrest that we're experiencing in our nation and around the world. Bitcoin is therefore already diversified. There is no single, centralized point of origin for it, so it is non-centric. There is, in fact, a central point of origin, but Bitcoin is decentralized.
Government control, entity control, or anything similar does not exist. Therefore, in the current situation, where there is a significant wealth gap between the rich and the poor, there is one of the largest wealth gaps recorded in human history. This is true both domestically and abroad. You can see the political unrest that exists right now, the tensions between the United States, Russia, and Ukraine. You can see the potential collapse of Evergrande in China as well as the political unrest between Taiwan and China.
Do you observe political conflict in the US between Democrats and Republicans? Bitcoin is, after all, by nature non-political. Therefore, if you take, for instance, being the tinfoil hat Doomsday, where, not to be politically charged, it's just a fact of where our world is at the moment that there are many political tensions. They may have always existed, but they are at least more frequently reported on in the news these days. As a result, having something that is completely driven by market forces and free from any political motivations can be very effective. In contrast, political unrest or war could devastate currencies all over the world. Bitcoin, on the other hand, ought to be fairly stable given that it is unrelated to any particular conflict or nation. So given the current state of global political unrest, it's a really intriguing asset class.
So these are the different reasons I think Bitcoin makes a lot of sense as an investment right now. And again, you know, when it's really easy to start investing, you can start investing with minimal amounts where the hurdle rate of thinking “I have to buy one coin, and which is $40,000.” It is not.
Disclaimer: this is not financial advice for everybody. You need to ensure that this is a suitable investment for you.. Make sure you're doing your own due diligence of whether it makes sense for you. But definitely think it's worth considering for your portfolio.