Bitcoin is the most valuable digital asset and has been around since 2009. It was created as a peer-to-peer digital cash system, and it quickly gained popularity due to its many advantages over traditional currencies. However, in recent years Bitcoin has also been seen as an investment opportunity, as its price has fluctuated significantly. In this quick guide, we will explore the possibility of Bitcoin becoming the global reserve currency and what that would mean for investors.
The Case for Bitcoin
Here are 3 reasons why Bitcoin could potentially become the global reserve currency.
- Bitcoin is decentralized, meaning that it is not controlled by any one country or government. This gives it a lot of stability, as no single entity can manipulate its price.
- Bitcoin is limited in supply, with only 21 million ever to be created. This makes it similar to gold, which is often seen as a store of value. To date approximately 19 million have been mined.
- More and more businesses and institutions are beginning to accept Bitcoin as payment, which gives it real-world utility.
Finally, an increasing number of people are investing in Bitcoin because they believe that it has the potential to unseat the US dollar as the world’s reserve currency.
Of course, there are also some risks associated with investing in Bitcoin.
- Its price is highly volatile, and it can fluctuate a great deal in a short period of time. This means that investors could potentially lose a lot of money if they don’t know what they’re doing.
- There is always the possibility that Bitcoin could be replaced by another digital currency in the future.
- Some governments are cracking down on Bitcoin use, which could negatively affect its price.
If Bitcoin were to become the global reserve currency, it would have a number of advantages over traditional fiat currencies.
Bitcoin advantages over fiat currency
For a variety of reasons, cryptocurrencies outperform traditional fiat currencies. For one thing, because they are based on cryptography and blockchain technology, they are more secure. As a result, they are much more difficult to hack or counterfeit.
- Cryptocurrencies are also global in the sense that they can be used anywhere on the planet.
- Cryptocurrencies, unlike traditional fiat currencies, are not controlled by governments or banks.
- They become more democratic as a result, and users have more control over their money.
- Cryptocurrencies are deflationary, which means their value rises over time. As a result, they are a good investment.
For all of these reasons, it is clear that cryptocurrencies are being discussed as the currency of the future.
However, there are also some risks associated with investing in Bitcoin that potential investors should be aware of.
Remember that no one knows what the future holds. However, some experts have publicly stated their predictions for Bitcoin’s future pricing. While none of these predictions are guaranteed to come true, they do provide insight into how some market experts believe the market will play out.
Speculation on the Future of Bitcoin
- Tim Draper, a venture capitalist, recently predicted that Bitcoin will reach $250,000 in the next two years. However, the Federal Reserve has shifted to a very hawkish stance in 2022, and he has reversed some of his bullishness. He recently predicted that Bitcoin would be choppy for the next 12 to 24 months, with a slight bullish bias.
- According to Edward Moya, senior market analyst at Oanda, some of the selling pressure in 2022 is easing, but the more substantial buyers may not appear until the end of the year. “Crypto is not going away,” he believes, and “some investors are beginning to believe that further downside may be limited.” This echoes the sentiment expressed during the previous “crypto winter.” He, like many other experts, believes that Bitcoin will surpass $100,000 in the next bull run.
- The CEO of financial advisory firm deVere, Nigel Green, recently stated that Bitcoin will bounce when the stock market does and that the worst of the selling is over. He believes that the bottoming process will be slow, but that new highs will be reached eventually, possibly in 2023. In other words, during the 2022 drop, Bitcoin could be “on-sale.”
When to invest in Bitcoin
While it is possible to profit from Bitcoin, it’s not always smart to jump in at the top. For example, Bitcoin rose to an all time high of $69,000 in November 2021. This caused a lot of FOMO with people buying Bitcoin. The subsequent price drop wiped many investors out, especially those that bought Bitcoin on margin.
Whether you should buy now or wait for a fall in prices is a question of your own risk tolerance. In addition, you should make sure that your investments are not out of line with other areas of your financial life. This includes emergency savings, debt payoff, and traditional retirement accounts.
Bitcoin is a volatile asset, which means that its value can dramatically change in a short period of time. However, it’s a relatively safe bet for investors who are looking for a long-term investment. If you’re planning to buy Bitcoin, make sure to use a reputable trading platform. Coinbase and Kraken are two leading US-based exchanges that offer many advantages-especially to new investors.
The first thing to remember is that it’s important to diversify your investment portfolio to reduce your overall risk exposure. You should not invest more than 10% of your portfolio in risky assets. In addition, keep in mind that you’re unlikely to make a profit if you’re not well-prepared for fluctuations in the market.
Overall, investing in Bitcoin is a risky proposition but one that could potentially pay off big in the long run. If you’re thinking about investing in Bitcoin, be sure to do your research and only invest an amount that you’re comfortable losing.
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