Bitcoin

Is Bitcoin a Buy in 2023?

Even after its monumental 71% price drop over the last 52 weeks, Bitcoin (BTC -0.56%) has still produced stellar returns of over 12,300% since April 2013 (the earliest point at which price data for the token is available on coinmarketcap.com). This performance far outpaced the returns of the broader market’s S&P 500 index during the same period. And investors who might have missed out on profiting from that performance might be asking if they should get in now. 

Here’s why I don’t think it’s too late to buy Bitcoin as we head into 2023. In fact, it’s probably still early. 

It’s been a tough year 

The unprecedented levels of fiscal and monetary stimulus the government and the Federal Reserve deployed to help support the U.S. economy during the coronavirus pandemic, coupled with the persistent supply chain issues and shortages caused by geopolitical conflicts, have combined to produce high inflation in the U.S. and around the world over the past year and a half. To combat this, the Federal Reserve has been hiking its benchmark interest rates aggressively, which has caused investors to sour on riskier assets, a category that Bitcoin and cryptocurrencies firmly belong in. And this is one of the main reasons why prices for these assets have cratered in 2022.

Additionally, the meltdown of FTX, one of the largest crypto exchanges, has caused panic in the crypto market. Since the news came out that FTX was having major liquidity issues and was seeking to be bought out by bigger rival Binance, Bitcoin’s price has fallen 8% (as of this writing), further propelling 2022’s downward trend. FTX has now filed for Chapter 11 bankruptcy protection, and the market will deal with the fallout from this scandal for a long time.

The FTX situation may actually prove to be a catalyst for Bitcoin, as it could speed up the implementation of a clear regulatory framework for cryptocurrencies. But as the head of the Securities and Exchange Commission has previously asserted that Bitcoin is a commodity, not a security, the top cryptocurrency would probably be untouched by any new regulations. 

This much-needed regulatory clarity will make Bitcoin a more attractive investment for institutional investors, which could lead to huge capital inflows into the asset, possibly boosting the price in 2023. 

Bitcoin has a massive upside 

While Bitcoin was originally created in 2008 as a “peer-to-peer electronic cash system,” with the first block of transactions verified in January 2009, its adoption up to this point has really only been as a tool for financial speculation. And this makes sense, given that volatile and high-flying tokens attract people searching for quick profits. 

But I think it’s worthwhile to view Bitcoin through the lens of it being a store-of-value asset — something investors can use to place their savings in. Most people who are crypto enthusiasts know that there is a hard 21 million token limit on the total number of Bitcoins that can ever be mined. That limited supply should in theory support a higher price over time as demand rises. And as the world becomes increasingly digital, younger generations will probably look to store their wealth in innovative assets such as Bitcoin as opposed to gold. 

While many people in developed countries where there is easy access to robust payments and financial infrastructure might not truly appreciate Bitcoin’s potential, those in poorer nations certainly understand its merits. Take Venezuela as an example. The South American country is notorious for going through periods of hyperinflation that have wiped out the purchasing power of the bolivar. In this unfortunate situation, a Venezuelan citizen would undoubtedly prefer to hold their savings in Bitcoin as opposed to the local currency. At least with Bitcoin, there’s no way a central authority can manipulate its value. 

Additionally, Bitcoin may one day cement itself as a reserve currency, which means that it could be used to settle transactions. A lot of progress still needs to be made on this front, particularly as it relates to transaction speeds, fees, and ease of use. But the potential is definitely there, especially when you consider the unchecked, and often harmful, control that governments have over money supplies and financial systems. Having a truly decentralized payment system would be a net benefit for the world, in my opinion.

It’s probably a good idea to allow the FTX tidal waves to calm down a bit before taking action, and you may want to wait for some progress on the regulatory front as well. That’s why a Bitcoin investment in November 2022 might be jumping the gun. But brighter days are coming, and the perfect buying window for Bitcoin should open soon.

Bitcoin still has a long way to go, arguably making 2023 the perfect time to invest for those who have been waiting on the sidelines. With the price down roughly two-thirds this year, the upside is massive. 

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