Although Bitcoin has pulled back from its highs in October, many investors remain quite bullish.
The token is increasingly being viewed as a form of digital gold.
Some notable investors on Wall Street still see huge upside for Bitcoin.
It’s been an interesting year for Bitcoin (CRYPTO: BTC), the world’s largest cryptocurrency. After Donald Trump’s election as president last year, Bitcoin and the rest of the crypto sector soared, as Trump vowed to remove regulatory overhangs on the sector, which he has largely done. Congress has now passed legislation to further clarify the regulatory landscape, and crypto-friendly cabinet members and advisors have also bolstered the sector. Trump even announced the creation of a U.S. Strategic Bitcoin Reserve.
However, in recent months, Bitcoin has stumbled, possibly due to several concerns, including the extent to which the Federal Reserve will lower interest rates, the state of the economy, and broader economic liquidity. So is Bitcoin a millionaire maker?
Due to Trump’s pro-crypto approach, more investors are willing to buy Bitcoin, and more mainstream financial institutions are offering crypto solutions, including custody and the ability to buy many cryptocurrencies on mainstream brokerages.
But beyond this new environment, investors seem to increasingly believe that Bitcoin is a form of digital gold. That’s because there is a finite supply of 21 million tokens, with roughly 95% of tokens already in circulation. Still, it could be a while before all Bitcoin tokens are issued, due to halving events that make it harder to mine new Bitcoin, therefore slowing issuance of new coins.
Still, this creates a favorable supply-and-demand dynamic. There is also a wide debate over whether Bitcoin is truly a form of digital gold, as it often trades like a highly volatile tech stock. However, Bitcoin has enjoyed strong appreciation over the years, similar to gold. Gold can hedge against inflation due to its finite supply, and investors often view it as a haven amid rising geopolitical tensions, which have been plentiful in recent years.
As you can see in the chart above, although it’s not perfect, there appears to be a clear correlation between Bitcoin and gold’s price movement during the past roughly six years. Part of the reason gold — and possibly Bitcoin too — has performed so well is that the market is clearly increasingly concerned about the U.S.’s worsening debt situation.
Total debt has now surged past $38 trillion, the fiscal deficit is approaching $1.8 trillion, and the U.S. government’s interest payments on the debt now account for 13% of total U.S. government spending. Investors are concerned that the dollar will lose significant value, which has made gold and perhaps Bitcoin a hedge against dollar debasement.
finance.yahoo.com
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