Bitcoin: bull against bear | Nasdaq

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The Bitcoin token (CRYPTO: BTC) has nearly tripled in value over the past 52 weeks, and the three-year chart shows a breathtaking 1360% return. Regulators take cryptocurrencies a lot more seriously than they did in the last rally of 2016, and even traditional banks are working on their digital currency strategies.

How bullish should you be on Bitcoin right now? Two Motley Fool contributors agree that this is a valuable digital asset, but one would like to remind you that Bitcoin is still a risky bet.

Image source: Getty Images.

The first is always the best

Rich Duprey (Bull): There are over 8,000 cryptocurrencies on the market today, and more are created daily, but the grandfather of all, Bitcoin, remains at the top of them all. Shakespeare once noted that heavy is the head that wears the crown. Always be on the lookout for usurpers to the throne, but any one of the thousands of suitors is unlikely to be a real threat.

Bitcoin paved the way for a cryptocurrency tsunami and has become the standard by which all others are measured. With a valuation of nearly $ 1 trillion at the time of writing, Bitcoin is the most valuable cryptocurrency and accepted as a viable alternative to a money-based society, unlike almost all other coins. . And he’s accepted by more merchants around the world than any of his rivals.

Over 7,600 merchants accept Bitcoin, while the second most valuable cryptocurrency, Ethereum, is only accepted by 3,900 merchants. In comparison, despite its insane popularity this year, Shiba Inu has a sparse collection of only 374 merchants.

This universality is difficult to compete with, which means that while other digital currencies may become mainstream, they will not supplant Bitcoin. There is also a growing institutional interest in Bitcoin and its support, as well as a wide availability of wallets, exchanges, payment services, gaming platforms and more that accept or are denominated in Bitcoin. What was once a disruptive asset has since become mainstream.

Like other durable assets such as gold and silver, Bitcoin’s inherent scarcity means that its value will increase over time as demand increases, even if there are crazy price swings in the short term. . And it is this volatility that offers investors their greatest opportunity.

We are in the middle of a period of runaway inflation, which is not expected to abate anytime soon. Trillion-dollar government spending programs, a compliant Federal Reserve pumping billions more into the economy, and historically low lending rates are conspiring to drive prices up. Because Bitcoin cannot be devalued like government money, it is a hedge against inflation.

Yes, Bitcoin is expensive now, but it will become even more so. Today’s value will seem strange to a future investor who envisions the heights that cryptocurrency will reach.

Don’t get too crazy on Bitcoin, dear investor

Anders Bylund (Bear): I’m not here to tell you that Bitcoin is a terrible investment. It is true that this cryptocurrency giant holds a huge first-come advantage that will keep it relevant for years to come. I’m just asking you to take it easy with this one.

Despite Bitcoin’s unique position in the market, owning this digital asset carries real risks. If you’re tempted to bet the farm, your entire retirement account, and a second mortgage on Bitcoin tokens, I urge you to reconsider this idea.

There are a few companies that have actually bet on Bitcoin by converting most or all of their cash reserves into the main cryptocurrency. Business intelligence specialist MicroStrategy (NASDAQ: MSTR) has 121,000 Bitcoin tokens on its balance sheet, worth more than $ 6.1 billion at current prices. The company only had $ 57 million in traditional cash equivalents at the end of its third quarter. MicroStrategy’s stock chart is almost identical to Bitcoin’s price chart these days:

MSTR data by YCharts.

It’s great if Bitcoin is really going up on the moon. MicroStrategy CEO Michael Saylor will look like a genius if and when Bitcoin prices rise from $ 50,000 to $ 1 million. Honestly, I think this is where Bitcoin is going in the long run, and I wish Mr. Saylor the best of luck.

However, there is a greater than zero risk that something will go wrong along the way. For example:

A significantly better technical solution to the same problems Bitcoin is addressing could disrupt the former disruptor. Tough government regulations could take Bitcoin’s breath away. The software behind Bitcoin is still technically in beta testing and could still undergo significant changes as the codebase evolves. Among these potential changes, developers may well decide to drop the hard cap on the total number of Bitcoins – thus losing that much-vaunted protection against inflation.

Again, there is a very good chance that none of these risks will materialize, but I also cannot categorically say that they are impossible. Michael Saylor’s all-in bet on Bitcoin would seem extremely misguided if the cryptocurrency encounters one or more of these potential problems.

So please be careful there. I own a small fraction of a Bitcoin, as well as several other digital currencies, and all of these represent a minority of my total investment portfolio. This is the smart way to get started in the cryptocurrency market, just like you shouldn’t bet your savings on just one stock or the world’s most amazing bottle of Cabernet Sauvignon or the best batch of tulip bulbs. A diversified portfolio can build your wealth even in the face of major setbacks.

How Much Bitcoin Should You Buy Today?

After checking out the potential pros and cons of owning Bitcoin tokens, you should sit down and seriously think about how your own wallet fits in the cryptocurrency market. You are the best steward of your own financial future. We simply give you the tools you need to make an informed decision.

10 Stocks We Love Better Than Bitcoin When our award-winning team of analysts have stock advice, it can pay off to listen. After all, the newsletter they’ve been running for over a decade, Motley Fool Stock Advisor, has tripled the market. *

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* The portfolio advisor returns on November 10, 2021

Anders Bylund owns Bitcoin and Ethereum. Rich Duprey has no position in the stocks mentioned. The Motley Fool owns and recommends Bitcoin and Ethereum. The Motley Fool recommends MicroStrategy. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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