Since hitting an all-time high of nearly $69,000 last November, the price of bitcoin (btc 2.22%) has plummeted around 70% at the time of writing, as investors have resented risky assets. but despite the recent underperformance, this does not mean that the long-term potential of this important cryptocurrency is affected.
For bitcoin to reach $100,000 per coin, its value would have to increase approximately five times. This may seem like a stretch, but it’s not out of the realm of possibility. let’s take a closer look at what needs to happen.
Reading: Will bitcoin reach 100k
the hold-of-value argument
Bitcoin’s most prominent use case relies on investors seeing it as “digital gold.” For decades, gold has been a popular asset for people to deposit their money. bitcoin, however, has four key advantages compared to the precious metal.
Bitcoin is easier to store, since it does not take up physical space. Second, a bitcoin is divisible to the eighth decimal place (or one hundred millionth of a bitcoin), called a satoshi. Plus, thanks to the many payment services out there, like a visa debit card from coinbase and “pay with crypto” from paypal, bitcoin can be used to buy goods and services.
Finally, bitcoin is absolutely finite. only 21 million coins will be produced. and this supply limit, coupled with rising demand, supports a higher price over time. Gold supply, on the other hand, may increase if the price of the metal rises enough to make it economical to seek deposits and open more mines around the world.
See also: How to Earn Interest on Bitcoin • Best Rates • Benzinga Crypto
These critical characteristics support the argument that bitcoin could very well be superior to gold as a store of value. Even if the total market capitalization of bitcoin, which stands at $393 billion at the time of writing, only reaches 15% of the $12.5 trillion of gold in the world, the price of one coin would dwarf $ 100,000. I don’t think that’s a huge exaggeration.
expanding set of infrastructure and services
It is very likely that most people’s first interaction with cryptocurrencies is buying bitcoins. Fortunately, today, there are an unlimited number of ways to buy the digital asset. fintech players like block, coinbase, paypal, and robinhood make it easy to buy and store bitcoin with just a few taps on a smartphone.
then there are more advanced services that could be attractive to institutional investors. For example, the investment bank goldman sachs has a dedicated bitcoin trading desk. there are also numerous exchange traded funds related to bitcoin.
because fiat currencies, like the us. uu. dollar, lose value over time thanks to inflation, large corporations like block, microstrategy and tesla have decided to allocate some cash on their balance sheets to bitcoin. I hope more companies do this too.
Bitcoin’s growing legitimacy as an asset has led countries like El Salvador and the Central African Republic to make it legal tender within their borders. Whether citizens actually use bitcoin in their daily lives is another matter, but these moves show that leaders are taking it seriously.
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In addition to being used primarily as a store of value, bitcoin could also play a role in disrupting the $589 billion global remittance market. Overseas citizens traditionally must pay hefty fees, averaging 6.5% of the transaction size, to money transfer companies to send money home to loved ones. developers must find ways to scale the bitcoin network, but with fees that are essentially non-existent, this is a potential use case that can unlock considerable economic value in the world.
As the demand for bitcoin increases, so will the price.
an imminent threat
The path to $100,000 per coin is not without risk. The most important factor to consider is the threat of government intervention. last year, china essentially banned the mining and holding of cryptocurrencies. while the leaders in the us In the US, as Securities and Exchange Commission Chairman Gary Gensler and Federal Reserve Chairman Jerome Powell have publicly stated that they do not intend to ban cryptocurrencies, investors will want to pay attention to any developments here .
In May, the White House issued an executive order directing various government agencies to learn more about digital assets and find ways to regulate them for the safety of consumers. I think this was positive news that pointed to the legitimacy of cryptocurrencies in a way that will be productive for all stakeholders.
practice patience
Even though it is the world’s first and most valuable cryptocurrency, investors will want to embrace a very long time horizon. no doubt bitcoin will experience more ups and downs on the way to possibly reaching $100,000. the smart move is to put down just 1% of a well-diversified portfolio. in this way, the disadvantage is limited and the advantage is enormous.
See also: Cryptoverse: 10 billion reasons bitcoin could become a reserve currency | Reuters
