After the cryptocurrency market lost nearly two-thirds of its value in 2022 is up about 36% so far this year (as of the morning of February 27). With the calendar change, investors appear to be warming to the asset class again.
According to coinmarketcap.com, there are currently over 22,000 different tokens. But in my opinion only one of them rules. Amidst the Cryptocurrency bull markethere’s why Bitcoin (BTC 0.63%) stays the best digital asset to buy. And it’s not even close.
What about the other tokens?
There is no doubt that other popular crypto networks, such as Dogecoins And Shiba Inu, have skyrocketed in a short period of time, making some lucky people very rich. The problem, however, is that these dog-inspired meme tokens lack any real-world utility. They are mainly used as a tool for risky financial speculation.
Then there are the more promising blockchains, such as ether, CardanoAnd Solana. All of those smart contract-enabled cryptocurrencies are trying to solve various problems, but the main one is that they could disrupt entire industries by eliminating costly and inefficient middlemen. With decentralized finance protocols, savings and lending is a prime objective.
However, I’m not convinced yet. These projects have security and network issues and can become increasingly centralized due to them Proof of Stake Consensus mechanisms, have complex and often delayed technical development pipelines, and are controlled by small groups of people. So far, the progression (or lack thereof) hasn’t been anything special.
Bitcoin has compelling properties
With a brief explanation of why I’m not too interested in another cryptocurrency, let’s turn our attention to Bitcoin. It’s the oldest cryptocurrency at 14 years old, and the longer bitcoin remains relevant and survives, the more likely it is to go nowhere.
I believe that bitcoin’s boring nature or its simplicity and lack of complicated features is actually an advantage. Furthermore, Bitcoin is not controlled by a single person or small group of people who could change its fixed token supply of 21 million. This property should not be underestimated.
But most importantly, I believe Bitcoin is helping to solve two incredibly massive problems our world is facing today. First, and more directly, Bitcoin seeks to fix money. We have seen governments continue to run huge budget deficits and major central banks pump money into economies for most of the last 15 years. While interest rates are on the rise in the US as our country’s debt burden continues to mount, it is only a matter of time before the Federal Reserve reverses course. And the result could be stubborn inflation above the 2% target.
Having a place to store wealth that is not controlled and manipulated by politicians is one of Bitcoin’s purposes. And when we zoom out, it’s hard to find a larger addressable market than money itself.
Additionally and indirectly, Bitcoin could help steer the world towards more sustainable and abundant energy. Many naysayers point to the network’s proof-of-work mining system and its energy consumption as a major drain. But the reality is that bitcoin mining can be set up anywhere and offers a way to monetize excess energy that is often wasted. Also, this can actually incentivize greater investment in clean energy, as there will always be a benefit.
Bitcoin’s potential is that one day it will not only be a solid version of money, but it will lead to abundant energy for the world. These are undoubtedly two of the most important problems we face.
Positive price action
At its 2022 bottom of under $15,800 in November, Bitcoin was 76% below its all-time high. But so far in 2023, the world’s best crypto is up 41%. And although it’s up 139% over the past five years, the recent price action could be the start of a higher positive uptrend for Bitcoin.
Thanks to a key event called a halving, the reward miners receive for completing transactions and securing the network is halved roughly every four years. The next halving is expected to occur in April 2024. Bitcoin price usually rises in the period before and after this important event. This means now could be a good time to get bullish on Bitcoin.
Neil Patel has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.
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