Bitcoin is a revolutionary concept that has set in motion thousands of other new and innovative ideas. The controversial coin, which was dismissed by many early on, has slowly gained more popularity and traction among investors.
One of the biggest criticisms of Bitcoin is the massive amount of volatility the coin regularly sees, making it extremely difficult to market it as a substitute for fiat currencies.
But in 2017, when the coin exploded in value and grew by more than 1,000% in a single year, investors could no longer ignore it.
Since that incredible run-up in late 2017, it’s come back down in price. However, in recent years with more big-name investors getting behind the coin, Bitcoin has started to post impressive performance and has been rapidly approaching its 2017 high.
Here are the catalysts for Bitcoin’s price to increase
The first reason why Bitcoin’s price continues to increase is because it’s the most popular cryptocurrency. There are tens of thousands of cryptocurrencies, yet many people have only heard of Bitcoin. Therefore, as investors are deciding they want some exposure to digital currencies, Bitcoin is often the asset of choice.
Similar to it being the most popular, Bitcoin is also the easiest cryptocurrency to buy. Plus, almost any other cryptocurrency you want to buy requires you to own Bitcoin first as a trading pair. Therefore, the demand for Bitcoin remains strong, even if cryptocurrency enthusiasts are interested in investing in rival coins.
Another big reason why Bitcoin’s price has been rallying rapidly as of late is because more investors are jumping on the bandwagon. In addition, several companies are also joining the trend. Most recently, PayPal just announced it will now let users buy and sell Bitcoin.
And lastly, many investors look at Bitcoin in a similar way gold. The coin goes up in value when the U.S. dollar is being devalued. That’s what we’ve seen this year with all the major stimulus. Plus, going forward, there will be more stimulus in addition to super-low interest rates, which will likely send investors searching for assets that can protect them from rising inflation.
How high could Bitcoin go?
Back in the day, saying it would go to $100,000 was thought of as ridiculous. Now, though, it’s legitimately a quarter of the way there (in Canadian dollars) and continues to gain popularity. Suddenly, Bitcoin at $100,000 one day doesn’t look like such a long shot anymore.
In the short term, it’s a lot harder to tell where the price is going. But with more and more billionaire investors allocating at least some of their portfolios to cryptocurrency, it’s no longer considered a highly speculative investment, especially if you’re buying it for the long term.
For investors wondering if there are other ways to gain exposure to Bitcoin, you could buy a mining company such as HIVE Blockchain Technologies.
Owning a Bitcoin-mining stock is sort of similar to owning a gold-mining stock. However, it’s quite a bit riskier, which is why if you are looking to gain exposure, you’re better off just buying the coin.
With the volatility it already has, an investment in Bitcoin should always be a long-term investment. And buying a Bitcoin-mining stock for the long term is just too risky.
For example, in the past three years, HIVE stock has lost 65% of its value. At the same time, Bitcoin is up by roughly 35% in price.
There is a tonne of opportunity for investors willing to make a long-term investment in Bitcoin. There’s also a tonne of risk too, though, so it’s important to exercise caution, make smart investment decisions, and stay committed to your long-term investment.
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Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings.