While it is definitely exciting that Bitcoin recently surpassed the $10,000 mark again, we’re even more enthusiastic about Bitcoin’s long-term prospects.
After the recent price spike, some may feel tempted to invest a large chunk of money in Bitcoin now. However, it may actually be wiser to pursue a more affordable, less risky DCA (Dollar Cost Averaging) investment strategy with Vimba.
With a Vimba DCA account, you make small investments over a long period of time. This lets you benefit when prices rise without having to constantly worry about any price fluctuations that may occur. All you have to do to get started is set up a free Vimba account, connect your bank to it and schedule at least one monthly investment of $20 or more.
Keep reading to learn five reasons why we feel Bitcoin has a bright long-term future ahead of it.
Facebook’s LibraCoin will give Bitcoin a long-term boost
The consensus at this point among thought leaders is nearly unanimous: Facebook’s new cryptocurrency will spark interest in Bitcoin and other cryptocurrencies and will be good for the blockchain industry as a whole.
Forbes contributor and former Morgan Stanley executive Caitlin Long recently wrote that LibraCoin “will turn out, in the end, to be a Trojan horse that benefits bitcoin.” In an interview with CNBC, Jehan Chu, co-founder of blockchain investment firm Kenetic shared a similar view. He said that the launch of LibraCoin has “forced every CEO to take crypto seriously.” Steven Eliscu, EVP of Corporate Development at DMG Blockchain also believes that GlobalCoin will be a “boost for the cryptocurrency sector.” Garrick Hileman, head of research at Blockchain.com and a researcher at the London School of Economics, went as far as to say that Facebook’s LibraCoin announcement was “one of the most important developments in the history of cryptocurrencies.”
Facebook plans to go live with LibraCoin in 2020. Anyone who begins investing in Bitcoin now will benefit if LibraCoin boosts Bitcoin next year and in the years that follow.
Institutional investors are finally getting in the game
One of the most interesting things about the most recent Bitcoin price spike is that it’s being driven not by individuals but by “smart money” institutional investors.
CME Group, the world’s largest derivatives trading market, recently tweeted that there are “growing signs of institutional interest” in BTC futures markets. This data matches up with a recent report from investment bank JP Morgan, which stated that Bitcoin markets “likely changed considerably since the previous spike in Bitcoin prices in end-2017, with a greater influence from institutional investors.”
Increased demand for Bitcoin is a good thing for everyone who owns the world’s most popular cryptocurrency. Since the supply of Bitcoin is algorithmically limited, continued interest from big money investors will likely keep driving up BTC prices.
Up until recently, institutions were wary of investing in Bitcoin. According to Tony Sio, head of regulatory surveillance and marketplace at Nasdaq, weak AML (Anti Money Laundering) protections and other similar concerns were the main reason for their reluctance to dabble in crypto markets. As blockchain businesses continue to mature and improve the way they do business, this will likely become less of an issue.
Another development that could encourage institutional investors to consider Bitcoin would be if the US Securities and Exchange Commission were to authorize the first US-based Bitcoin ETF (Exchange Traded Fund). ETFs let investors trade the value of various assets without having to actually take ownership of them. Since there are many security risks involved in trading actual BTC, a Bitcoin ETF could encourage more US-based “whale” investors to participate in Bitcoin markets.
Earlier this month, SEC chairman Jay Clayton explained to CNBC that his agency is currently working on finding a way of authorizing the first cryptocurrency ETF. Custody issues and market manipulation concerns are the two main obstacles standing in the way, he said.
The EU is planning to print more money (again)
One of the main aspects of Bitcoin that makes it unique compared to government-issued currency is that there’s a limited supply of it. Central banks, however, can print more money whenever they deem it necessary to do so.
Last week, the European Central Bank signalled that it plans to print more money to stimulate Europe’s stagnant economy if conditions don’t improve. The announcement drove the price of the Euro down 0.3%.
Printing money usually has a positive short-term effect on economies. However, there’s a tradeoff: the more money that’s in circulation, the less it’s worth. That has a negative effect over the long haul. If inflation worsens in Europe and the economy suffers as a result, European investors may increasingly look to Bitcoin.
Mining rewards halving event is coming up
Every four years, the rewards that Bitcoin nodes receive for processing transactions gets reduced by half. This halving does the opposite of what printing more money does for fiat currencies: it makes Bitcoin scarcer. Given the economic law of supply and demand, this is a good thing for anyone who owns Bitcoin.
There have only been two “halving” events in Bitcoin history. The first occurred in November of 2012 and the second happened in 2016. After both events, the price of Bitcoin increased. If history repeats itself, expect another spike in 2020 and again in 2024.
Analysts are worried about another global economic downturn
According to International Monetary Fund chief economist Gita Gopinath, there are currently “many downside risks” that have the potential to send the global economy into a downward spiral. Chief among these is the trade war between the US and China.
Another troubling indicator is government bonds. When a government’s bond yield curve is inverted, that means that it's market participants expect rates to be lower in the future than they are today. Each time this has happened in the United States over the past 60 years, it has experienced a recession. The picture looks the same in Japan, Britain, Australia and Germany.
It’s impossible to tell what will happen to the price of Bitcoin if there’s a world recession on the scale that happened in 2008. After all, Bitcoin wasn’t even around then. However, if investors view Bitcoin like gold, they may decide to use it as a safe-haven. Gold prices usually increase during recessions and times of uncertainty.