In the past 10 years, the total value of the cryptocurrency asset class has grown significantly from around $12 billion to almost $1.7 trillion today. Not all cryptocurrencies have survived in this competitive market, and only the strongest have managed to survive.
Throughout this evolution, one asset has risen to become the epitome of a cryptocurrency and is unequivocally the most robust, resilient, and valuable asset on the market today. There are several reasons Bitcoin (BTC 1.25%) would be the most deserving of a $1,000 investment today, but two in particular deserve to be highlighted.
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Understanding the halving and its impact on crypto prices
Maintaining a long-term perspective when evaluating investments is crucial, but it doesn't mean investors should dismiss short-term developments. For Bitcoin, there is one event in the near future that makes it the cryptocurrency most deserving of a place in your portfolio.
In April, it will undergo its fourth halving. It's an event hardwired into Bitcoin's code that occurs with every 210,000 blocks added to its blockchain (roughly every four years), at which point its supply growth rate is cut in half. It is one of the primary features that preserves the cryptocurrency's sound monetary policy, upholds its finite nature, and has made it an ideal store of value.
In the crypto's early days, the supply grew more than 10% a year. But with three halvings under its belt, the growth rate has since fallen to just 1.75%. And in four short months, it will be reduced again to a measly 0.85%. This process will continue until all 21 million coins are mined some time in the next century, at which point Bitcoin will enter unprecedented territory.
The halving holds significance for many reasons, but the most compelling for investors is how it alters the dynamics around supply and demand. Historical data shows that some of the most impressive gains come in the months after the halving as the market attempts to find equilibrium.
In the previous years that halvings have taken place, Bitcoin's price has increased by an average of about 128% as prospective buyers compete for fewer available bitcoins.
The gathering tailwinds mean Bitcoin's best days remain ahead
Breaking down Bitcoin's short-term prospects can be helpful in certain scenarios, but we're trying to play the long game when it comes to investing. Luckily, few other assets have as many tailwinds coalescing to send prices higher.
First and foremost, we must recognize that the adoption of cryptocurrencies continues to trend higher, which will naturally benefit Bitcoin due to its spot at the top of the asset class.
Then, there is growing interest among deep-pocketed institutions looking to gain Bitcoin exposure. While retail investors like you and I were the primary buyers over its 15-year history, the pending approval of a spot Bitcoin exchange-traded fund (ETF) holds the potential to unlock billions of dollars from Wall Street and other institutions, allowing investors to add the cryptocurrency to pension funds, 401(k)s, and other investment accounts.
Perhaps the most intriguing is the technological evolution of Bitcoin. For most of its existence, its simple design lacked the infrastructure to support novel uses for cryptocurrencies that have become so popular today, such as non-fungible tokens (NFTs), decentralized finance, and much more.
But that is changing. A revitalization is taking place that will enable Bitcoin to become more usable thanks to the development of new protocols like Ordinals and Layer 2 solutions such as the crypto Stacks.
Lastly, Bitcoin remains the quintessential cryptocurrency due to its decentralization, thus-far-impenetrable security, and unique monetary policy. Its vast network of miners and nodes operating worldwide makes it the most decentralized among all cryptocurrencies, ensuring its resiliency.
And Bitcoin has never been hacked and is unlikely to be as its network continues to grow and strengthen. Then, consider its finite supply of 21 million coins, along with the slowing supply growth as halvings continue, and it becomes easy to see how it might have a brighter future than any other cryptocurrency.
