2020 has been a year full of events. It included a global pandemic, the stock market rising, millions of unemployed people, and continued uncertainty in global markets. Yet, we saw Bitcoin prices recover from 5,300 in March to almost 19,000 at present. The question is whether Bitcoin is becoming overpriced, and is it too late to buy? If we put away short-term volatility and take a long-term perspective, there’s a reasonable path for the value of Bitcoin to achieve over 500,000 within the next decade. To go even further, Bitcoin will hit 100,000 in the next 12 months.
Bitcoin is a store value. When we talk about the valuation of an asset, the first is to understand fundamental economics. For example, equities bonds in real estate often derive their value from generating cash flows; therefore, the valuation of these assets involves projecting future cash flows. Commodities are more utility-based. Thus, industrial supply and demand secure their prices.
Moreover, more investors in traditional finance, such as Wall Street institutions have started to realize, that Bitcoin has a unique hedging capability against long-term inflation risk with a risk-reward profile, better than its closest monetary cousin- Gold.
Different from its 2017 ride Bitcoin’s current accumulation is characterized by more vocal institutional support. Square and micro strategies allocate treasury cash into Bitcoin. The office of the comptroller of the currency allows US banks to offer crypto asset custody. With Paypal enabling crypto buying and selling, Fidelity making a case for a five percent asset allocation, and doubling down on crypto engineering recruiting, the mainstream momentum is building up.
Security of Bitcoin
Otherwise, if we look at Bitcoin’s full trading history, there is a clear upward trend together with growing asset holding addresses, growing active addresses, and growing network computing power. Bitcoins network represents the security level that everyone wants to see in a network, especially when money is involved.
Consequently, Bitcoin is unlike any other asset we’ve encountered before. This is genuinely a worldwide wealth network that will continue to increase as the world recognizes the significance of its properties.
Michael Saylor, CEO of Microstrategy summarizes that Bitcoin is not a currency, nor is it a payment network. It acts as a bank in cyberspace run by incorruptible software. It offers worldwide, affordable, simple, and secure bank accounts for billions of individuals who don’t have an option to own a hedge fund.