Should you buy Bitcoin for $ 50,000?

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It is 10:05 a.m. EST on September 3 and the price of Bitcoin (CRYPTO: BTC) is hovering around $ 50,000. The main crypto asset has made an epic return to the upside after languishing below $ 40,000, and even briefly below $ 30,000, throughout the summer.

Volatility is at the rendezvous when it comes to cryptocurrencies. However, it is still worth making a game plan for when crypto prices are moving rapidly in either direction. Since Bitcoin is currently on an uptrend, now is a great time to ask yourself if it is worth buying, even at a higher price.

Image source: Getty Images.

Why Bitcoin has been a great investment

Bitcoin has faced its fair share of criticism from reputable investors who see it as a ploy to make money. It is common to attribute the success of Bitcoin solely to speculation. Even Charlie Munger, Warren Buffett’s right-hand man, has expressed his contempt for investing in Bitcoin. Putting your hard-earned savings into contrarian asset classes is difficult when investors you admire say it’s a bad idea.

It goes without saying that greed and speculation played a big part in the rise of Bitcoin. But to say that they are the only reasons for the rise of Bitcoin is a bit of a loophole.

Amazon has been a great stock because it redefined e-beginning and runs one of the biggest cloud computing platforms. Netflix has spearheaded a paradigm shift in home entertainment. Yes, people eventually bought these stocks because they thought they could make money from them. But the real reason Amazon and Netflix stocks have worked so well is that the companies themselves have gained influence and value. Bitcoin does not have a management team or quarterly financial data. But it has basic attributes that give it intrinsic value.

Cathie Wood, CEO of Ark Invest and a big supporter of Bitcoin, believes that the value of Bitcoin can grow over time for the simple reason that more and more companies will wear it both as an investment and as a hedge against it. ‘inflation. Bitcoin’s underlying value stems from its security, track record in combating cyberattacks, global portability, and independence from fiat currency. A capped supply of 21 million tokens, over 90% of which are already in circulation, means the additional supply from mining will soon become negligible. Businesses, especially those headquartered in countries with unstable fiat currencies or who have difficulty accessing the US dollar, find value in Bitcoin due to its inherent scarcity. Complete this view globally, and we could see strong underlying demand for Bitcoin from companies around the world for a very long time.

Evaluation

No one can tell you how much Bitcoin is worth now or what it might be worth in the future. Valuing Bitcoin is far more abstract than the already difficult task analysts embark on when setting price targets for a stock.

An easier way to think about Bitcoin, and other crypto assets like Ethereum (CRYPTO: ETH), is to ask yourself if history is playing out. If Bitcoin was a game of baseball, what round are we in? Is there more room to run? Or is the market saturated and everything is down from here?

Even a surface glance at the crypto market would tell you that it is still pretty rough around the edges. Much of the reason for the appreciation in the price of Bitcoin in recent years has to do with the fact that the asset class is increasingly sophisticated in terms of institutional adoption, accessibility, and regulatory potential. These themes appear to be at the start of their development. However, this is a discussion open to interpretation.

Why buy in the first place?

If an investor thinks the crypto story is played, then the asset class can be avoided altogether. And as the price of Bitcoin has increased over the past few months, there is even less incentive to buy.

Each investor has a different reason why they would buy in the first place. And if they haven’t already, they might have a reason they’d rather buy in the future. Like any asset, it’s much easier to buy something if you understand how it works. Getting a basic understanding of the Bitcoin mining process and a summary of what has happened over the past few years in the crypto space can provide the essential due diligence needed to invest, or not to invest, with confidence. .

Regardless of the price, it is better not to think about buying Bitcoin because you think it will increase, but rather to buy Bitcoin if you think its influence will grow. It is difficult to answer this question without doing some homework. Even so, there are good arguments on both sides as to whether Bitcoin can grow from here. Therefore, before deciding whether Bitcoin is worth buying at $ 50,000, it is best to consider whether Bitcoin makes sense to you in the first place.

Bitcoin, Ethereum, and high yielding stablecoins have different characteristics that might suit an investor better depending on their risk tolerance. So if Bitcoin is not a good option, it is possible that another crypto asset is more suitable.

The bottom line

Bitcoin’s collapse in May and June had little to do with fundamentals, although China’s regulatory crackdown on cryptocurrencies exacerbated the price decline. That said, the ultimate level to which the price fell was pure speculation. Likewise, the cryptocurrency’s rebound over the past month is simply market volatility. As you zoom out, not much has changed in Bitcoin’s investment thesis since its initial collapse in May.

Investors interested in Bitcoin could benefit from monitoring regulatory updates, institutional measures such as PayPal’s decision to open crypto trading for its UK clients and other news that adds to the history of the long-term growth. Ultimately, Bitcoin’s success over the next several decades depends on its grip in financial markets around the world. If this is something an investor believes in, then there are valid reasons to buy Bitcoin, even at $ 50,000.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a premium Motley Fool consulting service. Were motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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