It’s been 6 years since I first wrote about Bitcoin in this space. On that occasion, I proposed to think of it as an investment that could function as a refuge from inflation. Despite its comings and goings, bubbles created and exploded, the crush went straight to the heart and bitcoin responded more than love, surpassing all forecasts: by then, it was achieved at $ 108 per unit and today is sold above 5,000, which speaks of a yield of more than 4,600% in dollars from April 2013 to date. Regarding the peso, growth is much higher, since at that time the dollar was trading at $ 5.10 (a bitcoin cost $ 550 6 years ago and now is around $ 220,000).
Given this astronomical evolution, why do we talk about a “victorious return” to the cryptocurrency? It turns out that things happened in the middle: bitcoin reached a price of US $ 20,000 in 2018, but immediately plummeted, resisted a time of US $ 6,000 and then drilled that floor to touch a recent minimum of US $ 3,100, carrying the fall to 85% from its historical maximum.
Just as in the crazy bullish race operators were heard to anticipate that sooner or later it would be worth the US $ 100,000, during the steep decline numerous specialists and market players assured that bitcoin was over. As we see, this analysis may not be successful.
Today we will review the latest developments in the ecosystem and the arguments that aim to closely monitor its evolution, beyond the marked fluctuations in the price. Namely: despite the volatility and price collapses, the crypto world never stopped growing as an industry.
What is bitcoin and where does its value reside?
Bitcoin (BTC) was born after the financial crisis in the United States as an alternative to the system and debt karma. It gave rise to one of the most revolutionary technologies of recent times: the blockchain, which allows the purchase, sale, transfer, and custody of assets in a completely decentralized manner, without having to go through banks, government entities or stock companies.
The main virtues of the blockchain are decentralization, immutability (once the data is loaded into a block nobody can modify it) and computer security (bitcoin has never been hacked).
A thriving and growing financial technological highway was built around the BTC, which today gives it a market value of almost US $ 90 billion.
While some think of the BTC as a cryptocurrency that would offer an alternative to traditional currencies, others claim that it will be transformed into a crypto commodity: a sort of digital gold.
My opinion is that the BTC came to change the way trust is built around financial assets, after in 2007 and 2008 governments and banks dynamited the world of beliefs by betraying investors who had trusted their systems. of control and values.
The BTC allows “bridging” governments as money creators (through each Central Bank) and commercial banks in their role as custodians, eliminating risks and costs at the same time.
How did large companies react to the crypto threat? First with indifference, then with contempt, later with some interest and, finally, with adoption measures, although shy in many cases.
Blockchain adoption: the cases of Facebook, Square and JP Morgan
CEO JP Morgan, Jamie Dimon, has always been one of the staunch enemies of the BTC. However, the company took a 180-degree turn by stating, at the beginning of the year, that it plans to launch its own cryptocurrency called JPM Coin. It will use blockchain technology for custody and transfers and can be used by its customers.
On the other hand, both Facebook and Square (American electronic payments company created by the CEO and co-founder of Twitter, Jack Dorsey) have been incorporating personnel for their new departments linked to the blockchain for months. Moreover, different media say that Facebook raised the US $ 1 billion (they use the billions figure) for the launch of a cryptocurrency.
Although these movements are not directly related to the BTC, it is considered that they could positively affect it by facilitating their use globally.
Conclusion and three final warnings
For the enthusiasts who are thinking of the BTC as an investment, there are some warnings that I also repeated years ago:
- It is necessary to study a little before getting fully into the crypto world. When the investor becomes your own bank, you should know how to use the devices (called hardware wallets) where you will store your holdings. Depositing crypto assets in exchange (an online platform to exchange cryptocurrencies) implies taking unnecessary risk and giving up one of the most important qualities that this crypto active possesses, which is decentralization.
- Like all new technology, it represents a highly risky and speculative investment. Therefore, no more than 5% of total assets should be invested. Also, a very long-term horizon should be projected, a minimum of 5 years.
- Investors should train their stomach to withstand falls close to 90% (it already had three in its short existence). Of course, the raises are also usually violent. So far this year, bitcoin is the asset that rose the most (37% in dollars).
Can the BTC return to its maximum of US $ 20,000 per unit reached on December 17, 2017? If technology continues to gain adherents, that should be its next bullish target.
What should be clear is that, in this type of investment, you can multiply invested capital several times or lose everything. Sometimes, there are no half measures.
Depending on their degree of risk tolerance and enthusiasm, each person must choose between taking advantage of what can become an excellent opportunity or simply letting it pass and looking outside.