Two years ago, I wrote that hitting 10,000 wouldn’t be enough for Bitcoin in light of asset fundamentals and market dynamics.
Today bitcoin is trading well above 60,000 and I learned a valuable lesson about the pitfalls of being careful when proclaiming valuation estimates to the public.
While I am not yet encouraging you to jump into the 100,000 option pool by the end of the year, there are three simple reasons to be optimistic, even for all of us who missed the first few. days of trading with BITO from ProShare.
Reason 1: Bitcoin is no longer a hassle-free solution
It’s been 11 years since Laszlo Hanyecz’s 3.8 billion pizzas, but Bitcoin is not yet close to reaching full maturity.
On the contrary, we are still firmly riding the hockey stick portion of the chart, with last year’s crypto adoption rates seeing a phenomenal 881% growth rate according to Chainalysis.
The adoption of Bitcoin has been particularly strong in Asian countries like India, Pakistan and Vietnam, where recent surveys have found that more than 40% of those polled hold a cryptocurrency. To get a sense of how far systemic adoption is in the West, compare this figure with the fact that less than 10% of respondents reported owning crypto in the UK and US.
The situation is changing rapidly, however.
Last week we saw the first Bitcoin ETF launched by ProShares and new futures based ETFs can be expected from at least Invesco, VanEck, Valkyrie Digital Assets and Galaxy Digital. At the same time, countries like El Salvador have made Bitcoin legal tender, and more than 80% of central banks around the world are actively engaged in digital currencies.
On the consumer side, Robinhood has already made crypto investing frictionless and payment processors like Venmo are joining the party and Google and Facebook have partially lifted their banhammers from crypto ads in recent months.
What we are seeing is fast kosherization of Bitcoin and cryptocurrencies, and the deeper integration of BTC into our financial systems will have a bigger impact than many of us realize.
More importantly, we can expect continued growth in demand for Bitcoin across all facets of life, from direct payments to institutional investor portfolios, all of which will work together to keep satoshis on an upward trajectory for years to come. to come.
Reason 2: Bitcoin and cryptos are a unique asset class whose demand will only increase
A few years ago Charlie Munger called Bitcoin “worthless man-made gold” and if you drop the first adjective, Charlie would be right.
Much like gold, Bitcoin provides a strong safety net against inflation, global turmoil, and any other shenanigans the market may throw at an investor. In fact, bitcoin and its crypto brethren have managed to straddle the fine line between speculation, gambling, and non-traditional diversification with far more success than gold ever could.
For example, over the period 2012-2020, Bitcoin’s correlation with the S&P 500, bonds, US real estate, oil, and emerging market currencies ranged from -0.1 to 0.03, which makes it an ideal tool for adding diversity to almost any portfolio.
Overall, Bitcoin beats gold easily when it comes to correlations with other defensive assets like bonds – pretty well done for a worthless and artificial variant, you wouldn’t think.
The past years have given us a taste of how our future will most likely be marked by geopolitical insecurity and the worsening ravages of climate change and man-made disasters. In an increasingly volatile environment, Bitcoin’s unique blend of defensive prowess and speculative allure makes it more scalable than many other asset classes today, paving the way for 100,000 and beyond.
Reason 3: Economy 1.01
To date, around 18.4 million Bitcoins out of a total of 21 million have been mined. Of these, experts estimate that 10-30% are off-market due to lost passwords, hardware failures, etc.
From a systems integrity perspective, the upcoming halving and eventual end of block rewards is a non-event. Around the year 2140, when this is expected to happen, miners will continue to operate the grids (ideally with renewables) with transaction fees to incent their efforts.
However, the same cannot be said for the nominal price of Bitcoin. As anyone with a 1.01 Macroeconomics course will tell you, a decrease in supply coupled with growing demand will inevitably lead to an increase in prices.
And demand is sure to grow. Even if we set aside issues of systemic adoption and coverage, there are plenty of untapped sources of demand ready to be picked.
A particularly powerful source is retail and consumer transactions, which have fallen behind in large part due to a lack of institutional support. In the first half of 2021, Visa (and its partners BlocFi, Circle, and Coinbase) transited more than $ 1 billion through their crypto cards. MasterCard is also betting on crypto, and we can expect its Bitcoin-linked card to become a staple in the years to come.
All in all, there is good reason to believe that 60k won’t be the end of the bull run, and while it will most certainly be a bumpy ride, things are looking good for those who are willing to buy and buy. to conserve.