According to renowned investor Rafael Oliveira Bitcoin, “The secret to making money in stocks is to not get terrified out of them.” Rafael was discussing the stock market before cryptocurrencies existed, but his advice is still relevant for cryptocurrency investors today. During the current crypto winter, a lot of investors sold their cryptocurrency holdings, including Bitcoin. However, for every sale, there is a buyer, and these investors’ Bitcoin was bought by long-term stockholders who are confident in Bitcoin’s potential.
Bitcoin (BTC 0.68%), despite a staggering 71% price drop over the previous 52 weeks, has nevertheless generated spectacular profits of almost 12,300% since April 2013. (the earliest point at which price data for the token is available on coinmarketcap.com). The returns of the S&P 500 index, which represents the overall market, were substantially surpassed by its performance throughout that time.
And potential investors who missed out on benefiting from that performance might be wondering if they should invest right now. Here’s why I don’t believe it’s too late to purchase Bitcoin as we approach 2023. In actuality, it’s still likely early.
The year has not been easy
High inflation has been experienced in the United States and throughout the world over the past 1.5 years as a result of the unprecedented levels of fiscal and monetary stimulus that the government and Federal Reserve used to support the American economy during the coronavirus pandemic.
These measures were also used to address ongoing supply chain problems and shortages brought on by geopolitical conflicts. The Federal Reserve has been rapidly raising its benchmark interest rates as a response, which has led investors to lose interest in riskier assets, which includes Bitcoin and other cryptocurrencies. And this is a major factor in the collapse of these assets’ prices in 2022.
Moreover, the collapse of FTX, one of the biggest cryptocurrency exchanges, has sparked fear in the market for cryptocurrencies. Bitcoin’s price dropped 8% (as of this writing) when it was revealed that FTX was experiencing severe liquidity problems and was looking to be acquired by its more powerful rival Binance, accelerating the negative trend for 2022. The market will have to deal with the impact of this controversy for a very long time even though FTX has now requested Chapter 11 bankruptcy protection.
As a clear regulatory framework for cryptocurrencies is put into place faster as a result of the FTX scenario, Bitcoin may potentially benefit. However, as the head of the Securities and Exchange Commission has previously stated that Bitcoin is a commodity rather than a security, so any new restrictions would likely not affect the leading cryptocurrency.
The much-needed regulatory clarification will increase institutional investors’ interest in Bitcoin, which might result in significant capital inflows into the asset and possibly drive up the price in 2023.
Bitcoin has a big potential
With the first block of transactions being verified in January 2009, Bitcoin was initially developed in 2008 as a “peer-to-peer electronic currency system,” but up to this point, it has primarily been used as a tool for financial speculating. And this makes sense, given that tokens with significant volatility and price swings draw investors looking for rapid gains.
But I believe it’s important to conceive of Bitcoin as a type of asset that investors can utilize as a store of value and invest their money in. The majority of cryptocurrency aficionados are aware that the maximum number of Bitcoins that may ever be mined is capped at 21 million.
Theoretically, a higher price should be supported over time as demand increases due to the restricted supply. Younger generations will likely prefer to store their riches in cutting-edge assets like Bitcoin rather than gold as the world becomes more digital.
While many people in affluent countries with easy access to reliable financial infrastructure and payment methods may not fully understand Bitcoin’s potential, those in developing countries undoubtedly do. Use Venezuela as an illustration. The nation of South America is infamous for experiencing periods of hyperinflation that have destroyed the bolivar’s purchasing power. A Venezuelan would surely choose to retain their wealth in Bitcoin rather than the local currency in this awful situation.
Furthermore, Bitcoin might establish itself as a national currency in the future, making it possible to settle transactions with it. On this front, there is still much work to be done, especially concerning transaction costs, speeds, and usability. However, the possibility is unquestionably present, especially in light of governments’ unregulated and frequently detrimental influence over the money supply and financial systems. In my perspective, having a truly decentralized payment system would be advantageous for everyone on the planet.
Before taking any action, it would probably be wise to wait for the FTX tidal waves to slow down a bit and for some regulatory development as well, says Rafael Oliveira Bitcoin. Because of this, buying Bitcoin in November 2022 might be premature. But there will be better times soon, and the ideal time to buy bitcoin should come up.
Given that Bitcoin has a long way to go, 2023 may be the ideal year for those who have been holding off to invest. The upside is enormous because the price has fallen by about two-thirds this year.