Despite soaring 275% since the start of 2023 and 47% since the start of this year (as of July 3), Bitcoin (BTC +2.43%) has basically been trading sideways after the start of March. It looks like there's difficulty for the digital asset to break out and start marching toward a new record.
And as of the afternoon of July 5, Bitcoin trades around $56,500, or about 23% off its peak price. Here's why investors should add the world's top cryptocurrency to their portfolio while it's less than $60,000.
Focus on the near term
As an asset that's only about 15 years old, the digital coin is still achieving certain milestones on its path to development. This January, the Securities and Exchange Commission finally approved the trading of spot Bitcoin exchange-traded funds (ETFs), a monumental moment in the crypto's history.
From the date of approval to today, its price has jumped 24%. Money is still flowing into these ETFs. With the greater accessibility and convenience that the funds provide, I think it's reasonable to assume that larger pools of capital -- from pension funds and sovereign wealth funds, for example -- will move some money to Bitcoin over time.
In April, Bitcoin underwent a halving, which cuts the new supply available to miners by half. This event happens roughly every four years, and it has typically resulted in a major bull run for the crypto in the 12 to 18 months after. With demand rising for an asset whose inflation rate has just declined, it makes sense that the price should go up.
And there's another potential near-term catalyst on the horizon. Although inflation remains well above the Federal Reserve's 2% target, there is hope that interest rates will start to come down sooner rather than later. When this happens, investors are incentivized to take on more risk in order to generate a higher return on their assets, which could lead to more capital finding its way to Bitcoin.
CRYPTO: BTC
Key Data Points
Focus on the long term
Zooming out and focusing on the big picture, there are other reasons to be optimistic about its potential. For starters, there are numerous companies, most notably Block, that are working on developing tools and services to help with Bitcoin's adoption. This could mean creating user-friendly physical wallets for blockchain assets or launching new payment mechanisms that use the crypto.
I also think it's important to consider how changing demographics can affect Bitcoin for the better. Gen-Zers -- defined as those between ages 12 and 27 -- are more likely to own crypto than stocks, according to a survey conducted by the online insurance seller Policygenius last October. In a world that is only becoming increasingly digital, it makes sense for people to want to own something like the leading cryptocurrency as a store of value when they might feel it serves them better than the traditional financial system.
There will only ever be 21 million bitcoins in circulation. By having this fixed limit, the digital currency is scarcer than gold. And it's portable, divisible, and functional in transactions. It could be easy to believe that it's a superior asset to gold.
The value of all the gold in the world is estimated to be $15.9 trillion. As a conservative assumption, let's say that Bitcoin's market cap gets to half that level, or about $8 trillion. At that point, each Bitcoin would be worth roughly $380,000. This implies an impressive nearly sixfold gain from today's market cap. If it takes a decade to get there, investors are looking at a theoretical 21% annualized gain in the price of the digital asset.
With Bitcoin trading well below the $60,000 level, I think investors would be wise to consider buying with the intention of holding the crypto for the long haul.
