Bitcoin (BTC +1.05%), 16 years after its introduction and with a market cap of more than $1.7 trillion today, is the world's oldest and most valuable cryptocurrency. Its ability to bounce back from lows to reach new highs points to its resilience. In other words, fewer and fewer people are questioning Bitcoin's staying power.
This leading digital asset has been sliding for about three months, but maybe a rebound is in the works. Should investors buy Bitcoin right now while it's trading for less than $90,000? Here are three reasons I think the answer to that question is a resounding "Yes."
Accommodative environment
One clear reason to be bullish on Bitcoin is more of a recent development. It relates to how the environment is changing to be more supportive of the advancement of the crypto.
For example, Bitcoin appears to be an important issue for the Trump administration, whether it's to create a strategic reserve or put policies in place to foster digital asset innovation.
Some of the world's largest financial institutions have also gotten in on the action. Powerful asset managers have seen lots of success with their spot Bitcoin ETFs, for example, which are shaping up to be big moneymakers.
Five years ago, I bet there were very few people who could have envisioned a future in which Bitcoin would be a key talking point in the political arena. It would've also been impossible to predict how much Wall Street has embraced Bitcoin. Seeing the crypto make great inroads in these two areas gives me confidence that not only is it not going anywhere, but it's increasingly looking like Bitcoin will be even more important to the discussion a decade from now.
CRYPTO: BTC
Key Data Points
Betting on global liquidity
Bitcoin's most important characteristic is its fixed supply. There will only ever be 21 million coins in circulation (about 19.8 million now circulate) because this hard cap is written in the Bitcoin code. In the world of finance, it's difficult to find something that is absolutely finite like this.
This scarcity is likely what has helped drive Bitcoin's price rise, as more and more people crave owning an asset that can't be debased, which is the case with fiat currencies. As we look ahead, it's easy to believe this trend will continue.
Since the financial crisis ended about 15 years ago, the M2 money supply of the world's four major central banks (U.S., Europe, Japan, and China) more than doubled to almost $90 trillion. This has been propelled by burgeoning fiscal deficits with no end in sight. In fact, the Congressional Budget Office predicts that in 2035, U.S. federal debt held by the public will jump from 100% of gross domestic product to 118%. That means trillions more in debt.
Bitcoin benefits from this expanding liquidity as more capital floods the financial system. This ultimately finds its way to the digital asset in the form of greater demand over time.
Reaching gold status
Because of Bitcoin's scarcity, it's often compared to gold. If we view gold's current market value of $19.7 trillion as Bitcoin's ultimate target, then the crypto has 11-fold upside from today's level. It's anyone's guess how long it will take to get to this point, but this means there is sizable return potential for investors who buy Bitcoin for less than $90,000.
This should provide some relief if you thought you missed out on the gains. However, I think gold's market cap might be a conservative comparison. Besides gold's longer history as a store of value, something Bitcoin can't compete with, the cryptocurrency is superior because it's more divisible, portable, and has minimal storage costs. It's even easier to spend. What's more, in an increasingly digital world, Bitcoin is poised to become a more popular store of value.
At its current price of about $84,000, Bitcoin looks like a worthwhile long-term investment opportunity.
