In typical fashion, Bitcoin (BTC -0.47%) is, once again, rising from the ashes. Recently hitting a new all-time high of more than $69,000, the brutal crypto winter that lasted much of 2022 is now but a distant memory.
Despite doubling in just over four months, there is still plenty of reason to believe Bitcoin (and cryptocurrencies in general, for that matter) has yet to hit its peak, presenting a valuable opportunity for investors. Here are three short- and long-term reasons I would buy Bitcoin with $10,000 today.
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The upcoming halving
The most immediate and apparent reason Bitcoin is worth a $10,000 investment today is the upcoming halving. Roughly every four years, as 210,000 blocks are added to the blockchain, Bitcoin’s rewards for mining new coins is reduced in half.
There have been three halvings so far, and the fourth is set to occur in mid to late April. This halving will be especially unique because it will cause Bitcoin’s inflation rate to fall under 1% for the first time.
Since the halving effectively makes Bitcoin more scarce, it has historically led to increases in price. During a year when a halving has occurred, Bitcoin has jumped by 125% on average. If a similar situation were to unfold this year, Bitcoin’s price could reach roughly $99,000.
While past performance is no indicator of future results, it is difficult to dismiss the impact of the halving on Bitcoin’s price. By reducing the rate of Bitcoin’s production, the halving makes it so that even if demand remains constant, its price must increase to compensate for the lessened supply.
The perfect hedge to inflation
Now for a more long-term reason to invest in Bitcoin. While this year will see another halving, it is just one of many scheduled to take place. These halvings form the basis of Bitcoin’s robust monetary policy and will continue until 2140, when the last Bitcoin is finally mined.
With a finite supply of only 21 million coins plus a diminishing inflation rate, Bitcoin has risen to become a viable hedge against inflation. And it will likely only become more capable of filling this role over time as the dollar’s value continues to erode.
It can be slightly complex, but while inflation has dominated headlines over recent years, it isn’t necessarily a new phenomenon. It is well known that policymakers and officials intentionally inflate fiat currencies like the U.S. dollar to supposedly stimulate the economy. Whether this is necessary for economic growth or not, I will leave it to the experts to decide.
What is clearer, though, is that any inflation reduces the buying power of currency holders, and it is nearly guaranteed that the dollar will lose value as time passes. Even if inflation is maintained at the targeted 2%, holders of these fiat currencies will see their purchasing power decrease by half in just 35 years.
In this regard, Bitcoin is the antithesis of fiat. Every dollar saved in Bitcoin is virtually immune to manipulation of central banks and governments. Not only is it protected, but since its inflation rate continues to diminish with each halving, and it has a finite supply of 21 million, any value stored in Bitcoin should grow with time.
The bona fide cryptocurrency
Bitcoin outperforms the dollar in several respects but is also superior to just about every other cryptocurrency. While many new cryptocurrencies parade functionality Bitcoin doesn’t provide, such as the ability to buy non-fungible tokens (NFTs) or participate in decentralized finance (DeFi) activities, they all fall short when it comes to decentralization and security.
In terms of security, Bitcoin’s vast global network is estimated to be 500 times more powerful than the best supercomputer. To put it simply, Bitcoin’s blockchain is virtually impenetrable and unhackable.
Adding to its security, Bitcoin is also the most decentralized blockchain network. Analysts believe there are somewhere around 57,000 nodes maintaining the Bitcoin network scattered around the world. Unlike other cryptocurrencies with concentrated points of potential failure, Bitcoin epitomizes a truly decentralized network.
So, not only does it possess characteristics that make it the ultimate hedge against inflation, but it also possesses two of the most crucial aspects contributing to a cryptocurrency’s value and long-term viability. Investors can rest assured knowing that any value stored in Bitcoin is safeguarded within the most secure and decentralized blockchain ever invented.
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