The Bitcoin (BTC +1.17%) cryptocurrency is a lot cheaper than it used to be. Bitcoin prices have stayed below $18,000 for more than a month at this point. Is this a good time to pick up Bitcoins on the cheap?
A brief overview of recent Bitcoin history
Once upon a time, about 13 months ago, Bitcoin's price reached $68,790. The cryptocurrency had more than quadrupled in value in 12 short months. The sky was the limit. The crypto market as a whole was worth more than $3 trillion. Six-figure prices seemed to be coming up shortly. Life was good for cryptocurrency holders.
But the market took a different turn at that point, and Nov. 10, 2021, turned out to be the summit of that particular Bitcoin bull market. The omicron variant of COVID-19 was about to turn the economy upside down again. Raging inflation was next on the menu, alongside the Russian attack on Ukraine and a global disruption of long-distance shipping services.
At first glance, none of that stuff seems like it would drive Bitcoin and other cryptocurrencies lower. If anything, Bitcoin was supposed to be an effective hedge against inflation. If the dollar in your wallet is losing value over time, a completely separate monetary system that has nothing to do with national banks and political agendas should hold steady, which increases its value when measured against the dollar.
CRYPTO: BTC
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Unfortunately, many investors rejected that idea in the turbulent market of 2022, lumping cryptocurrencies together with unprofitable growth stocks and other high-risk investments instead. In this time of economic crisis, those risky bets were largely verboten in 2022.
Making matters worse, the crypto sector brought additional risks to the party. Stablecoins lost their unshakable footing. Crypto lenders couldn't cover the sky-high interest rates they had promised to investors. One of the largest crypto exchanges in the world collapsed and filed for bankruptcy protection.
All of these issues weighed on Bitcoin over the last year. All told, the largest and oldest name in crypto is down to $17,100. That's down 75% from that brief moment in the record-setting sun, 13 months ago.
Image source: Getty Images.
Is the Bitcoin community planning something big?
Bitcoin doesn't have any game-changing plans right now. The code tree has no pending or planned changes. The mailing list for node developers is full of housekeeping notes, addressing minor issues but not exactly driving Bitcoin in new directions.
Remember the capacity-scaling projects of leading altcoins in recent months, like the Ethereum Merge or Cardano Vasil? Those code forks made fundamental changes to how each cryptocurrency operates, setting Ethereum and Cardano up for faster processing, lower electric power draws, and reduced transaction fees.
Bitcoin developers are planning nothing of the sort.
A few minor upgrades and bug fixes are bubbling under the surface, but everyday Bitcoin users and investors are not likely to notice them. You don't change a winning team. People have tried to make significant changes to Bitcoin's central platform over the years, creating so-called hard forks such as Bitcoin Cash and Bitcoin Gold, but the offshoots have never really challenged the original Bitcoin currency. Any attempt to make further changes is likely to result in yet another mostly forgotten hard fork, while the original Bitcoin keeps on ticking as before.
A vocal minority suggests that Bitcoin should follow Ethereum's example and replace the power-hungry proof-of-work (PoW) system with a lightweight alternative such as proof of stake (PoS). However, traditionalists argue that this change would undermine Bitcoin's security model. It takes a massive investment in mining hardware and electric power to take control of the Bitcoin blockchain through a 51% attack. PoS systems can't match that fundamental security feature, so I expect PoW and Bitcoin mining to be around until someone invents a better hacking idea.
CRYPTO: BTC
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Sure, pick up some Bitcoin while it's cheap (but not too much)
Bitcoin was not just first out of the gate but it also came with a fundamentally robust platform. It's easy to understand and work with. In the 14 years since Bitcoin's original whitepaper, nobody has come up with a significantly better model for decentralized and secure financial transactions on a global scale.
I can't guarantee that Bitcoin will fill this role forever, so I don't recommend converting all of your cash into Bitcoin tokens. But there is an undeniable long-term upside to this revolutionary system for digital transactions and value storage. MicroStrategy chairman Michael Saylor believes that Bitcoin will replace gold as a long-term value repository, which could bring prices up to at least $500,000 per coin within the next decade. ARK Investment Management CEO Cathie Wood sees Bitcoin topping the million-dollar mark by 2030. If they are within a couple of zip codes from the right ballpark, Bitcoin at $17,000 will look like a huge, flashing neon "buy" sign in hindsight.
There is a substantial chance that the Bitcoin investors buy today for less than $20,000 per token will be worth many times as much within eight to 10 years. There is also a smaller risk that something goes wrong on the way to that station, and Bitcoin never takes the throne from investment-grade gold. In that case, you'll be glad you didn't literally bet the farm on this overstated opportunity.
So the sensible thing to do is treat Bitcoin like any other investment. Buy some if you believe in the long-term growth story, but limit yourself to an ordinary post -- just like any other stock, bond, or mutual fund in your properly diversified portfolio.
And I'm not here to sell you on Bitcoin. If you prefer to stay with the more traditional investments that served you well so far, that's also perfectly fine. Only you know what's best for your own investment strategy, and Bitcoin is just one of many options out there.
