RJ Fulton, an analyst at the US-based consulting giant The Motley Fool, announced the cryptocurrency, which he describes as a “beacon of hope”. According to the analyst, Bitcoin “has emerged as an asset beacon of hope for investors seeking a truly decentralized and flexible asset in a financial and political environment fraught with uncertainty”. Moreover, with its unique features and growing acceptance, crypto is proving that it deserves a place in every investor’s portfolio. The amount of investment varies according to individual preferences. But there is growing evidence that some sort of allocation of the world’s most valuable crypto is becoming a necessity rather than a luxury. In addition, the analyst offers three reasons for BTC to take its place in portfolios. Here are the details…
Leading cryptocurrency attracts attention with decentralization
According to the analyst, one of the most interesting features of Bitcoin is that it is decentralized without any government policy or interference. Unlike traditional fiat currencies, which are subject to inflation and manipulation by central banks, cryptocurrencies operate independently on thousands of nodes spread around the world. Unlike other cryptocurrencies, and fiat currencies in particular, there is no single entity that has control of the network. This means that Bitcoin’s robust monetary policy is nearly impossible to change, giving investors confidence that it will continue to operate as it has since it was created in 2009.
Investors holding Bitcoin can maintain their value outside of the current financial system, whose strings are pulled by governments. Saving banks, providing stimulus checks to citizens and financing ever-increasing debt benefits in the short term. But these policies are enforced without the consent of individuals and ultimately erode the purchasing power of their hard-earned money. Bitcoin offers an alternative.
Cryptocurrency offers rarity
Besides decentralization, Bitcoin has another appealing aspect that sets it apart from traditional fiat currencies. These are its scarcity and the declining rate of supply growth. Unlike fiat currencies, which face constant inflationary pressures and have an unlimited supply, Bitcoin’s supply is strictly limited to 21 million coins. What’s more, there’s the halving mechanism, which is a process built into its code. As we have also reported as Kriptokoin.com, this ensures that a smaller number of Bitcoins enter circulation approximately every four years. Bitcoin’s supply growth rate today is roughly 1.75%. By April 2024, the next halving event will reduce that rate to less than 1 percent. About four years from now, it will be halving again. This process will continue until the year 2140, when the last BTC is mined.
The open source code of the cryptocurrency allows anyone to look into the inner workings and functionality of Bitcoin. So, the remarkable aspect of this process is its precision and transparency. By contrast, fiat currencies lack this level of certainty and transparency. It leaves people vulnerable to the unknown consequences of inflation and weak monetary policy. As the antithesis of fiat currencies, Bitcoin brings a sense of stability and predictability. Investors and users can rest assured that the supply will never exceed the predetermined limit of 21 million and that the planned halving events will provide a gradual decrease in the supply growth rate.
Institutional adoption and recognition are increasing
Considering that it has gained more than 12,000 percent in the last 10 years, it may seem like the chance to capitalize on Bitcoin has passed. But there may not actually be a better time than this. Bitcoin’s unique features are slowly starting to be noticed by people around the world and more recently by big institutional players. While its initial rise is attributed to ordinary individual investors, the entry of institutional participants further legitimizes the asset and could add unprecedented demand to the limited supply. Leading companies such as Tesla and MicroStrategy pioneered the concept of keeping Bitcoin on their balance sheets in 2021. Today, however, this trend has evolved further as industry leaders such as BlackRock, Fidelity, and Invesco are exploring the cryptocurrency’s entry into the stock market.
These firms plan to introduce spot Bitcoin exchange-traded funds, hoping to offer an exchange-tradable product. This will help democratize access to cryptocurrencies. It will enable millions of people to add Bitcoin to their 401(k) plans, pension funds and other traditional investment portfolios, creating unprecedented demand for the potentially scarce supply.
Are we in the opportunity stage right now?
Despite showing signs of diminishing volatility, Bitcoin remains one of the most volatile assets available today. According to the analyst, this should be taken into account by investors according to their risk tolerance. While this is beneficial in bull markets as its price increases exponentially, it can be problematic for those who want to control risk in bear markets. However, aside from its volatility, Bitcoin’s unique qualities could prove beneficial for those with a more risk appetite. As the recognition of these qualifications continues to increase, and as institutions with pockets of money invest, a potentially lucrative opportunity arises. In doing so, investors can regain their economic dominance. It can benefit from dynamics that evolve around supply and demand similar to cryptocurrencies.
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