Bitcoin price has enjoyed somewhat of a rally in the past month, spiking from a trading value of $9,000 to about $12,000. Analysts are speculating whether this over 30% increase might have taken the token into a new level of support, as it remains above $11,500. An increase for holding investors is always a positive, as it allows profit to be gained, but the bigger price tag of the cryptocurrency could scare off new investors who are wanting to dip their toes into the digital assets market.
So, this leads to the question: Can we consider Bitcoin as a cheap asset?
Bitcoin market cap compared with other assets
Looking at Bitcoin’s technology and the automated deflationary mechanism as well as macroeconomic factors, the price of Bitcoin might still be considered affordable. This is because of the relative market cap to the market size of the cryptocurrency. At present, the Bitcoin market cap is sitting around $215 billion, making up a massive portion of the entire cryptocurrency market cap. In 2017, during the most famous Bitcoin bull run, the record high market cap was over $800 billion. Comparing this to gold, which is around $12 trillion and the stock market value which is approximately $100 trillion, the market of Bitcoin is fractional.
Bitcoin’s boasts an impressive ROI
It’s famously known that Bitcoin is a volatile asset, and has seen roller coaster rides of price changes over the past ten years. Since it was launched into the world in 2013, the token has been through bull rallies and corrections, which has made investors both optimistic and extremely cautious about buying in.
However, despite several of the crashes which have happened following rallies, Bitcoin price boasts a massive return on investment over the past decade. With a whopping 8,500,000% since its launch, Bitcoin is the best-performing investment assets in the past ten years. Not only does it boast an amazing return for profit, but the cryptocurrency also has an impressive rate over its lifetime. According to data, buying Bitcoin has been profitable for 97.6% of all days since it was launched.
Expanding cycles of Bitcoin could lead the price to $100,000
Theories suggest that Bitcoin’s price seems to shift in longer-term cycles of rallies and corrections. Historically, the cryptocurrency has seen three cycles with each getting exponentially bigger and lasting longer than the previous. The most recent cycle was indicated by the 2017 rally, which saw Bitcoin reach a record of nearly $20,000 before crashing to an aggressive bear run when it fell to $3,100.
According to the theory, that bearish movement marks the fourth expanding cycle and it will end with Bitcoin hitting a new, massive record high. Analysts predict the cryptocurrency will tend to push the $100,000 mark. Founder and CEO of Heisenberg Capital Max Keiser is one such analyst who believes that Bitcoin will head to $100,000 USD after a minor pullback happens. Keiser commented on Twitter that he thinks Bitcoin will reach $28,000 USD before a pullback. From there, he predicts Bitcoin will hit $100,000 USD. If this is the case, then the current price of Bitcoin at just above $11,600 doesn’t seem overpriced for an investment.
Cryptocurrencies are fast becoming safe-haven assets
It’s worthwhile noting that the demand and sentiment of the cryptocurrency market has increased as a result of the global pandemic. As the US dollar has battled to maintain its value, the demand – and price – for safe-haven assets such as gold, silver, and Bitcoin have increased quickly. This stands to reason, given that there is a capped supply of Bitcoin and once the token has been mined, no more can be created. On the other side of the coin, the bank can continue to print money, with each dollar printed, the value deflates. As a limited asset, Bitcoin is safe from inflation from overproduction and as the demand increases, so does the value.
Buying Bitcoin and HODLing
As a volatile asset, investors can be cautious to play trades with it. One way to combat this is to buy (low) and hold the asset. Given the cycles, it’s difficult to know when the best time to buy Bitcoin is. The value might surge, but it also might fall, and the money invested might be lost. However, as Tyler Winklevoss – founder of Gemini exchange – states, “it’s still the bottom of the first inning” implying that it’s never too early (or too late) to invest.