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Bitcoin Just Hit an All-Time High. Is It a Buy?

By Jon Quast – Updated Nov 10, 2021 at 3:15PM

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Investors are buying today because of inflation fears, but there's more to drive adoption in the future.

Popular cryptocurrency Bitcoin (BTC 0.74%) hit an all-time high on Wednesday after the Bureau of Labor released troubling inflation data for the Consumer Price Index (CPI). In short, consumer inflation just hit a 30-year high, causing investors to seek inflation-proof places to park their money. And Bitcoin is one of these perceived inflation hedges.

Whether this particular issue continues to catalyze Bitcoin's adoption remains to be seen. After all, the federal government is working to get inflation under control. So the fundamental question is whether the cryptocurrency will generally be in demand going forward. And there's reason to believe it will. Here's why Bitcoin could be a good investment even at all-time highs.

A person appears deep in thought while reviewing data on a computer screen.

Image source: Getty Images.

There are few investments that can match Bitcoin's returns over the past 10 years. But even today, many retail investors are wary of Bitcoin's credibility, making them hesitant to buy. If these skeptics become believers, that would drive Bitcoin higher -- and there are good reasons to think this can happen. Governments like El Salvador now consider Bitcoin legal tender. Regulators like the Securities and Exchange Commission (SEC) are warming to cryptocurrencies, as evidenced by the recent approval of a publicly traded Bitcoin futures ETF. And multibillion-dollar businesses like MercadoLibre have purchased coins for their balance sheets. These things all lend to Bitcoin's credibility, increasing its perceived viability as an investment.

Also consider that there will be more use cases for Bitcoin in the future. Right now, people can make transactions with Bitcoin or simply buy and hold. But Bitcoin's blockchain is upgrading soon to make smart contracts possible, opening up a realm of new possibilities. These things and more can create more demand for Bitcoin, sending its price higher.

Of course, there's plenty of risk, too. Bitcoin's price has cratered 50% or more multiple times in its history, typically following strong bull runs like the one we're watching now. Moreover, there's tons of innovation in the cryptocurrency space at the moment, offering solutions that could out-innovate Bitcoin and steal market share.

These risks aside, I believe there's a strong chance Bitcoin can keep winning if investors patiently endure the inevitable ups and downs in the future. If cryptocurrency is here to stay, Bitcoin is likely a primary beneficiary.

Jon Quast owns shares of Bitcoin. The Motley Fool owns shares of and recommends Bitcoin and MercadoLibre. The Motley Fool has a disclosure policy.

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