The fact that the cryptocurrency market has roughly doubled its market cap in 2023, to total just under $1.6 trillion (as of this writing), is an encouraging sign that the optimism surrounding the asset class is rising. Investors are probably looking at digital tokens as a place to allocate some capital right now.
When looking at what I believe to be the top cryptocurrency to buy in December, the decision is pretty simple: It's Bitcoin (BTC -0.83%), and it's not even close.
Bitcoin's huge 2023 rally
The world's most valuable digital asset, now with a market value of over $800 billion, has been a fantastic performer in 2023. Bitcoin's price is up 148% this year, crushing the broader crypto market, as well as the major stock market indices.
Bitcoin has performed better than all the "Magnificent Seven" stocks, except for Nvidia and Meta Platforms. This is a clear sign the risk-on trade is fully in swing among investors. After interest rates rose rapidly in 2022, coupled with surging inflation, the market has been rewarding tech-related assets this year.
But what's even more telling is how Bitcoin has done compared to what many consider to be two of the safest assets around. This year, the price of an ounce of gold has risen by just 10.7%. When economic and geopolitical uncertainty is high, as it has been recently, as well as elevated inflation, you'd think that gold would do better than it has.
We can also look at the S&P Global U.S. Treasury Bond Index. As of Dec. 12, this safe-haven financial product has climbed 2.2% in 2023.
It's difficult to come to any definitive conclusions about the price actions of various assets over a short period. However, Bitcoin's return this year against what are considered the most conservative assets is a huge vote of confidence that investors view the cryptocurrency in an extremely positive light.
Reasons to be optimistic
Now could be one of the best times to buy Bitcoin. Three upcoming catalysts could boost the digital asset even higher over the next 12 months or so.
First, Bitcoin is unique in that it has a set supply schedule, or a predetermined inflation rate. About every four years, the amount of newly created Bitcoin that miners receive, for approving transactions and securing the blockchain, is cut in half. And the months leading up to this so-called "halving" event, followed by the several months after, has typically been an extremely bullish time for Bitcoin. The next halving is set to occur in April 2024.
Perhaps the catalyst that is getting the most attention these days is the potential approval of Bitcoin spot exchange-traded funds (ETFs) from numerous asset management firms. Investors are awaiting the decision of the Securities and Exchange Commission. If it's approved, which many experts believe is an inevitability, it would legitimize Bitcoin in the financial services industry, while at the same time introducing lots of new capital. This could push the price up.
Finally, the latest inflation data, as measured by the Consumer Price Index, showed once again that the situation is improving in the U.S. And this could spur the Federal Reserve to not only pause rate hikes, but maybe even decide to start cutting rates in the near future. For a risky asset like Bitcoin, this could be a major tailwind.
Investors don't need to make things complicated by trying to find an under-the-radar cryptocurrency to invest in. The oldest and most valuable digital asset possesses a lot of favorable qualities, meaning it's the top crypto to buy right now.
