Bitcoin is the top holding in my entire stock & crypto portfolio because I believe it’s the best and most sought-after asset to own right now. Here’s why I think Bitcoin is a good investment moving forward.
Table of Contents
- Introduction to Bitcoin
- How Money Changed Forever in 1971
- The World Needs a Sound Global Currency like Bitcoin
- Inflation Proof: Protect Your Wealth Against Rising Prices
- Scarcity: There are Only 21 Million Bitcoin Total in Existence
- Bitcoin’s Historical Performance Is Greater Than Any Other Asset Since 2011
- Bitcoin is Poised for a Massive Runup
- Bitcoin’s Stock to Flow Model Predicts a Breakout Over $100,000 in 2022
- Risk Factors
- Best Place for Crypto Beginners to Invest in Bitcoin Safely
Introduction to Bitcoin
Many Bitcoin newbies are wondering if Bitcoin is a good investment even though the mainstream media spreads FUD about cryptocurrency all the time.
I first bought Bitcoin in 2018 and spent dozens of hours learning about why Bitcoin is valuable and what makes it a good long-term investment.
This is my honest opinion on why Bitcoin is a fantastic long-term investment if you are willing to think about the box and take a risk by investing in the world’s next global reverse currency.
Bitcoin (BTC-USD) surpassed the $1 trillion market cap again and now bulls are waiting for the next big achievement: 6 figure BTC prices.
Ever since Satoshi Nakamoto mined the first BTC in 2009, Bitcoin gave billions of people around the world a decentralized currency that could be exchanged without government or central banking influence.
I’m reading a lot of negative chatter on social media and hearing bearish price predictions from friends and family who clearly have no idea what Bitcoin is or truly represents.
Michael Saylor, one of the biggest Bitcoin bulls, did a fantastic job explaining everything you need to know about Bitcoin in an interview with Tucker Carlson.
Watch this interview from start to finish if you really want to understand why Bitcoin is the next big thing.
Too many people misunderstand the entire point of Bitcoin and write it off too soon before fully understanding it. If you’re a beginner then read the Bitcoin whitepaper and get educated.
This is my first Bitcoin article on this column and I want to do my best to educate you on what makes Bitcoin special and why you should reconsider any doom or gloom predictions.
How Money Changed Forever in 1971
In 1971, President Nixon changed the world forever when he abandoned the Bretton Woods agreement 1 and no longer required the U.S. dollar to be backed by gold.
The Bretton Woods agreement pegged the US dollar to gold at a price of $35 per ounce.
President Nixon abandoned the gold standard to “create prosperity without war” but he also caused global inflationary pressure to destroy our savings over time.
Consumer prices have skyrocketed while the U.S. dollar and other global currencies lose spending power due to inflation over the last 50 years.
Even older millennials like myself remember the good ol’ days when you could walk into any Dollar store with a few bucks and fill up your basket.
This year, Dollar General and Family Dollar raised their prices over $1 2 on many items to keep up with inflation. If inflation continues spiraling out of control then we will experience a situation where you can hardly buy anything inside these stores for $1 in the near future.
Hyperinflation is a possibility as well and even Block Inc CEO Jack Dorsey warned the entire world about the dangers of hyperinflation:
The reason behind inflation? Simple supply and demand.
As central banks and governments issue more currency, the value of all existing currency has less value. When Nixon decided to stop backing the U.S. dollar with gold, he removed the 1 thing that made the U.S. dollar strong: scarcity.
The M2 Money Supply shows us how much fiat currency is currently in circulation as depicted by a simple linear graph.
The COVID-19 pandemic caused the amount of U.S. dollars in circulation to increase by 38% since February 2020, which means everyone’s savings lost purchasing power.
World governments issued trillions of dollars in newly minted currency to help citizens and businesses cope with the pandemic but this act only made things worse in the long run.
While billionaires got richer during the pandemic, homelessness and hunger skyrocketed globally because people couldn’t keep up with rising prices.
Rent increased all over the United States and many hard-working people are now living on the streets or in motels because they can’t keep up with inflation.
Many wealthy individuals relocated to tax haven states like Nevada, Texas, and Florida to escape higher corporate and capital gains taxes. Even Elon Musk moved Tesla headquarters to Texas as a ploy to build on cheaper land, recruit talent, and avoid higher taxes.
The World Needs a Sound Global Currency like Bitcoin
All of this shuffling around can easily be avoided by using a sound currency that’s fixed in supply and cannot be printed on demand.
Bitcoin is the world’s first digital currency with a total supply of 21 million coins that fixes this complex problem with simplicity.
Bitcoin releases 6.25 BTC every 10 minutes with a total daily supply of 900 coins. Miners get rewarded with Bitcoin by solving complex mathematical equations to secure the network.
Every 4 years, the total supply of Bitcoin gets cut in half and causes a massive supply shock. The Bitcoin halving reduces the total mineable supply of BTC in a predictable and honest way.
Only 21 million coins will ever exist and Bitcoin’s scarcity is one of the main reasons why it’s been the top-performing asset over the last 10 years.
No other stock, cryptocurrency, or asset comes even close to Bitcoin’s amazing compound growth rates. Bitcoin has outperformed Gold and the S&P 500 by a wide margin over the last 10 years:
Bitcoin has a whopping 146% CAGR even though the world’s oldest cryptocurrency trades at extreme highs and lows.
What Makes Bitcoin so successful is the underlying premise: Bitcoin is a savings account to 8 billion people around the world.
1.8 billion people don’t have access to a bank account and cannot save money in a safe and honest way to prepare for their future. Bitcoin solves this problem and operates 24/7 365 on every weekday, weekend, and holiday.
The legacy banking system failed to adapt to a modern world where people need access to their funds all the time. Thus, Bitcoin disrupts an old and outdated system with better technology and accessibility.
Inflation Proof: Protect Your Wealth Against Rising Prices
Society has declined alongside the demise of the US dollar and fiat currencies in general.
Growing up in the ’90s, I cannot believe what I’m witnessing today as I watch society fall off the deep end.
The world is suffering from many plaques as I type this and a lot of these problems come from a broken monetary system that robs hard-working people of their savings.
Every day, the US dollar and other government issue currencies lose value, and thus our work energy gets diluted over time.
Of course, many investors put all their money into the stock market but it doesn’t solve the underlying problem that plagues society.
Only 55% of Americans invest in the stock market so the other 45% of Americans must suffer and watch their savings dwindle over time.
Historically, Gold was the #1 hedge against the US dollar but gold is not extremely rare on this planet. Every day, gold miners dig up the earth and sell more gold in the global economy. It’s one of the reasons why gold performance over the last 10 years remains flat. There is too much gold supply and not enough demand.
Bitcoin fixes this problem with a finite fixed supply. Anyone can mine Bitcoin and hold it as an investment.
Scarcity: There are Only 21 Million Bitcoin Total in Existence
When doing research on any investment, many investors focus solely on price but I believe looking at total supply and market cap provides a lot more information.
Bitcoin has a total supply of 21 million coins, of which 18 million have already been mined.
According to Decrypto.co, there are around 2 to 3 million coins that will be lost forever. That puts further supply shock on Bitcoin and makes it more valuable in the long run.
Compare Bitcoin’s rarity to a publicly traded stock that issues common shares like Apple Inc on the NASDAQ or NYSE.
|Bitcoin (BTC)||21 million||$650 billion|
|Apple Inc (AAPL)||17 Billion||$2.4 trillion|
Apple Inc is the most valuable company in the world with over 17 billion common shares available and a whopping $2.4 trillion market cap.
Bitcoin’s 21 million coins are far rarer than the 17 billion AAPL outstanding shares.
While Apple stock does pay a dividend, you can earn a yield on your Bitcoin holdings by depositing your crypto into a Bitcoin interest savings account, too.
Scarcity equals value and I think Bitcoin is a better investment if you value the rarity of an asset.
Bitcoin’s Historical Performance Is Greater Than Any Other Asset Since 2011
Cryptocurrency tends to outperform most asset classes and Bitcoin leads the pack.
In 2011, Bitcoin’s price was under $1 and now 1 whole Bitcoin costs around $40,000.
Bitcoin is liquid and scarce so it retains its value better than any other asset on the planet. Over the last 10 years, Bitcoin has a CAGR of 200% that outperformed all other asset classes such as stocks, bonds, REITs, precious metals, artwork, and collectibles.
Even Grayscale Bitcoin Coin Trust (GBTC), which went public in 2013, has a total return of 26,000% since inception. If you want to invest in Bitcoin through the stock market then check out my list of best Bitcoin stocks.
Bitcoin will provide investors with some of the greatest upside although there are lots of risk factors to consider.
It’s possible that Bitcoin adoption could slow down or perhaps another cryptocurrency takes Bitcoin’s position as the dominant crypto asset.
I don’t think that’s likely because Bitcoin maintains a 40%+ dominance over the cryptocurrency market with a whopping $600+ billion market cap.
Bitcoin is the world’s oldest cryptocurrency and I don’t see its dominance changing anytime soon.
Bitcoin is Poised for a Massive Runup
Bitcoin gained a lot of positive momentum but still looks poised for a massive technical breakdown past the previous all-time high of $64,000.
Bitcoin fell to nearly $30,000 in mid-July after China banned miners, which caused the hash rate to fall off a cliff. However, China has always been anti-bitcoin and the CCP banned Bitcoin again for the 20th time this year.
Chinese Bitcoin miners relocated to crypto-friendly countries like the United States and Bitcoin’s hash rate recovered sure enough. The hash rate is the speed at which a miner can perform transactions through the Bitcoin network.
The hash rate increases as more miners join the network so it’s a good indicator of future price movements. More miners = more profits due to higher Bitcoin prices.
Elon Musk recanted his criticisms about Bitcoin during the B-Word Conference and admitted both Tesla and SpaceX held Bitcoin.
So what exactly changed? Absolutely nothing. China remains anti-Bitcoin and Elon Musk revealed himself as a HODLer.
China, Elon Musk, and anti-crypto naysayers attacked Bitcoin and prices recovered only after a few months.
Here are several key moments that will help push Bitcoin past $100,000:
- El Salvador became the first country to make Bitcoin legal tender and now Brazil is planning to make the same move.
- The SEC approved the first-ever Bitcoin-related ETF although the Volt Crypto Industry Revolution and Tech ETF (BTCR) will not invest in Bitcoin directly but instead hold companies with exposure to Bitcoin.
- 85% of Bitcoin has not moved in the last 3 months, which could create a massive supply shock leading up to the holiday season.
- JP Morgan identified Bitcoin, not gold, as the ultimate hedge against inflation.
The JP Morgan stance is probably the biggest shift I’ve seen out of all major investment banks.
In 2017, JP Morgan CEO Jamie Morgan called Bitcoin a “fraud that will blow up“.
In 2021, JP Morgan is planning to offer Bitcoin to its clients and calls it the best hedge against inflation.
A 12-year old cryptocurrency created by an anonymous person is now worth twice as much as JP Morgan (JPM) in terms of market cap.
Jamie Dimon had no choice but to join the Bitcoin standard and lose clients to another investment bank.
Bitcoin forced governments, legacy investment banks, the SEC, and the world’s richest person to surrender and accept the Bitcoin standard movement.
Bitcoin’s Stock to Flow Model Predicts a Breakout Over $100,000 in 2022
Bitcoin is trading around $45,000 with just under a $1 trillion market cap and will approach nearly $2 trillion in the market cap if the price reaches $100,000.
Bitcoin could breakout past previous resistance and test new all-time highs of around $135,000 according to PlanB’s Bitcoin stock to flow model:
FOMO buying and increased Bitcoin ETF approvals will add a ton of fresh money into the cryptocurrency markets. As I type this, Bitcoin is only $9,000 off its all-time high and I think $100,000 is a strong possibility by the beginning of December.
I expect lots of pent-up consumer demand and plenty of buying activity surrounding the Christmas holiday season will drive Bitcoin to new highs.
The smart money bought the dip around $30,000 and I suspect Bitcoin will experience selling pressure around $90,000. Crypto investors will have made 3x gains since the China mining ban and could be eager to lock in profits.
It’s risky to wait for $100,000 because smart sellers will place limit orders just under $100,000 to lock in profits.
Perhaps Bitcoin whales dump near $100,000 and send Bitcoin back near $70,000. Retail investors will sell in panic mode and BItcoin could rest near $65,000 assuming previous resistance turns into support.
In a worst-case scenario, I expect at least 10% upside from current price levels with 2x returns as a best-case scenario.
PlanB’s stock-to-flow model has been extremely consistent over the years so I’m not betting against it until it fails.
My motto is always the same: Don’t wait to buy Bitcoin, buy Bitcoin and wait.
So far this year, Bitcoin has defeated an electric car billionaire, the SEC, China, and a small-sized Latin American government.
Every person or organization that tried to stop Bitcoin has failed so far. It seems silly to bet against Bitcoin in any shape or form over the long run.
The future is bright for cryptocurrency but always remember Bitcoin will remain king in the foreseeable future.
We live in a digital world that must use a superior digital currency as a replacement to traditional fiat currencies.
If you want to protect your wealth for future generations then holding Bitcoin in your investment portfolio is a superior hedge to inflation than anything else.
I plan to never sell Bitcoin in exchange for fiat currencies and will patiently wait until the world adopts a Bitcoin standard.
Best Place for Crypto Beginners to Invest in Bitcoin Safely
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- U.S. State Department. “Nixon Shock, https://history.state.gov/milestones/1969-1976/nixon-shock
- Business Insider. “Dollar General, Family Dollar Price Hikes, https://www.businessinsider.com/dollar-general-family-dollar-price-hikes-inflation-hits-weekly-shops-2021-10