After a disastrous 2022 that saw it lose nearly 65% of its value, Bitcoin (BTC -1.54%) is off to a red-hot start in 2023. In fact, Bitcoin recently turned in its best January performance (up 39.4%) since 2013. That's particularly impressive given that a surprising number of analysts were bearish on Bitcoin's prospects heading into the new year.
While there are plenty of tokens that are outperforming it right now, Bitcoin is still my best cryptocurrency to buy today. Bitcoin has a strong track record of bouncing back from down years, and I don't think 2023 is going to be any different. Here's why.
Bitcoin's growth prospects
For one thing, Bitcoin's growth prospects are simply unparalleled right now. Cathie Wood of Ark Invest recently updated her price target for Bitcoin to $1.48 million (up from $1 million last year), and a big reason for that was the cryptocurrency's enormous growth opportunities in eight different market niches. According to Wood, Bitcoin is on pace to account for up to 10% of one key measure of money supply for emerging markets by 2030, and 25% of the entire global remittances market. At the same time, Bitcoin could make up as much as 6.5% of the investment portfolios of big institutional investors.
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These updated forecasts for Bitcoin line up with what we are seeing happen in the global financial markets. For example, when it comes to emerging markets, Bitcoin continues to make headway as an alternative to fiat currency. At the end of 2022, Brazil introduced sweeping new crypto legislation that paves the way for Bitcoin to be used as a form of payment and as an investment asset. Given that Brazil has the 12th-largest economy in the world, it makes sense that Ark Invest thinks that the cryptocurrency could eventually account for 10% of the M2 money supply of emerging markets.
We're also seeing Bitcoin become much more of a mainstream risk asset. In January, Goldman Sachs (GS -0.20%) proclaimed Bitcoin to be the best-performing investment asset in the world, on both an absolute and risk-adjusted basis. In short, given the amount of risk that you are willing to take, Bitcoin offers the best bang for your buck. This lines up with what we are seeing with large institutional investors who now view the cryptocurrency as just another risk asset. Last year, Coinbase (COIN 2.01%) made waves when it partnered with BlackRock (BLK -0.86%) to offer crypto investment services to large institutional investors. This trend is likely to continue in 2023.
Risk factors
Of course, there's more to choosing an investment than upside potential. You also have to factor in risk, and this is one area where I think Bitcoin really shines. While some cryptos got caught up in the FTX (FTT) meltdown, Bitcoin largely emerged unscathed. Nobody blamed Bitcoin for the collapse of the huge cryptocurrency exchange, and nobody tried to link it to former FTX founder Sam Bankman-Fried.
And then there's the matter of regulatory risk. While the Securities and Exchange Commission (SEC) has spooked the market by suggesting that even mainstream cryptos such as Ethereum (ETH -2.13%) should be classified as securities, nobody has been making that argument about Bitcoin. In fact, most analysts agree that Bitcoin might just be the only cryptocurrency that shouldn't be regulated by the SEC. And, since Bitcoin is still a proof-of-work cryptocurrency, it's not part of the fear, uncertainty, and doubt concerning a possible ban on staking by the SEC.
What to look for with Bitcoin
Right now, I only see a few factors that could derail Bitcoin this year. One of them involves the overall macroeconomic environment. As we saw in 2022, the cryptocurrency can get dragged down if the economy stalls, or if inflation picks up. So keep a close eye on the Federal Reserve and monetary policy.
Moreover, I'm also concerned that Bitcoin's energy-intensive mining operations could come under closer scrutiny this year. While some Bitcoin miners are moving to clean energy, the fact remains that the cryptocurrency is a hugely energy-inefficient asset. The White House has noticed, and in late 2022, it released a detailed report showing how proof-of-work cryptocurrencies such as Bitcoin are negatively impacting the environment and the energy grid. Given that the United States is now the No. 1 country for mining Bitcoin, any sort of Bitcoin mining ban would have immediate implications.
That being said, I'm tremendously bullish on Bitcoin. It's my single best crypto to buy right now. Bitcoin might not be skyrocketing to a $1 million price tag this year, but it has the clearest path to big gains in 2023 of any top crypto.
