Should You Invest in Bitcoin in 2022?
The decade-old cryptocurrency has remained reasonably stable in the market even though the competition is growing exponentially. It has seldom faced any major challenge in terms of delivery, functionality, and security.
Investing in Bitcoin might sound like a lucrative option. Still, the process requires a large time investment — ranging from studying the market, the price chart, fluctuations, and getting the right equipment to use.
Apart from these, it is essential to know the impact of government laws on cryptocurrency. Some central governments are strictly against the adoption of crypto as a financial tool, despite the economic recession that’s engulfing the world at the moment.
On the other hand, we’ve seen North Korea use cryptocurrencies to revive their economies at this perilous time.
What changed for Bitcoin in 2020?
The most significant global event this year is the outbreak of the deadly coronavirus. While the novel virus continues to spread, cryptocurrencies continue to grow in popularity.
The global markets saw a collapse on March 12, 2020. The day is also referred to as Black Thursday, and cryptos were not spared.
Bitcoin went on to lose 50 percent of its value as its price fell down to $3,800. Despite the day seeing record drops in the price of Bitcoin, Coinbase traders were buying the dip in high numbers.
Bitcoin was the most-traded crypto while currencies around the world plunged. On Coinbase, the total trading for Bitcoin was six times larger than its average. There was also a 69 percent buy-ratio.
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According to another report, Bitcoin has increased by 22% in popularity over the past few months. Overall cryptocurrency transactions have also increased by 236%.
Since the beginning of the year, even before the coronavirus started spreading, Bitcoin saw a notable increase in transactions.
If this upward trend continues, Bitcoin will continue to attract more purchasers. Back in 2010, the value of Bitcoin was less than $1. Today, one Bitcoin is worth $9,186.
Should you invest in Bitcoin — that’s a question that comes to the mind of not only young investors but also people who hear about Bitcoin and do some research on it. The demand is not just with individual investors. Bitcoin Lab CEO Tetsuyuki Oishi came up with three reasons behind the increased demand from institutional investors for cryptocurrencies.
First, he talked about how the decrease in demand for many products would make the stock market unattractive, resulting in long-term declines in profits for corporations. The common consensus is that a V-shaped recovery of stock prices is difficult. Therefore, investors need to seek out investment options other than stocks. Investors can’t just put everything in cash.
According to Mr. Oishi, cryptocurrencies are still an attractive option because they are not directly related to traditional investments. He explained that during the plunge, all assets — both gold and bitcoins — were sold. But they picked up after that. Consequently, there’s more room for assets that have little correlation with the society’s uncertainty which has been mirrored by the COVID-19 crisis.
The third reason for investor’s interest in cryptos is that compared to other asset types, investors have not yet included a cryptocurrency, especially BTC, in their investment portfolio. Bitcoin’s 2018 rollercoaster of a ride discouraged investors from taking much note of cryptos as assets. The volatility still exists, but it comes with an upward trend. After the initial outbreak of the COVID-19 crisis, it seemed that Bitcoin had already hit the bottom of the cycle, and has now slowly started scaling upwards. This is why institutions such as JP Morgan are finding out that more investors are interested in the Bitcoin asset class.
Another event that affected Bitcoin and its investment course this year was the halving. It has been a significant discussion around Bitcoins in 2022.
A quick background into it: when Bitcoin was introduced in 2008, every successful Bitcoin mine attracted a total of 50BTC reward by the system. This reward was halved at a 4-year interval. As of May 2016, mining a BTC attracted 12.5 BTC. In 2020, the reward was halved and now pegged at 6.25BTC. Consequently, this could result in a reduced flow of Bitcoin to the crypto market.
Bitcoin price following halvings.
The first two halvings took place in 2012 and 2016 respectively.
The price of Bitcoin was a little less than $10 before the first halving in 2012. After the halving took place, the price increased to $100.
In 2016, the price went further from $400 before the halving to more than $800.
May 2020 saw another halving and a subsequent increase in the price of bitcoin. The market cap of cryptocurrencies, too, had jumped to $35.3 billion by March 23, 2020.
Another factor that highlights the popularity of Bitcoins is the number of active Bitcoin addresses. As of May 11, there were a total of 943,869 active addresses on the Bitcoin network.
It was the highest number since January 28, 2018, which happened during Bitcoin’s surge bubble in 2017-2018 when prices increased to $19,915 on spot exchanges.
Besides Bitcoin halving, industry experts have identified another reason behind the upsurge. The financial policies of central banks to protect economies from the effects of coronavirus by investing in the stock market opened doors for Bitcoin and other major cryptos.
The reduction in the supply of Bitcoin to the market evidently resulted in price inflation.
Bitcoin stood its ground even though the trading volume of cryptocurrencies this year saw a decrease. Only a few altcoins trade $100,000 daily. In fact, less than 30% of coins reach this point.
The pool is big with thousands of coins whose prices are way less than $1.
The Bitcoin transaction fee is decreasing after the halving rally, and the number of transactions are falling, revealing that Bitcoin is getting back to its regular trading activity.
On the popularity front, while 27% of online transactions were made with Ethereum, a whopping 63% was made using Bitcoin. The remaining 10% were claimed by other coins such as Cardano, Bitcoin Cash, Litecoin, and others.
How has Bitcoin performed so far in 2022?
Investing in Bitcoin is often seen as a lucrative option for many who are new to investing in cryptos. But before that, it will help if we look at the track of Bitcoin in 2022 — there’s nothing better than an informed decision, right?
Since the beginning of 2022, Bitcoin has continued to see a rise in popularity and value.
Here’s the price of Bitcoin against USD in 2022.
This has been attested to by popular search engines such as Baidu and Google. Baidu reports that the search for “Bitcoin” on the Chinese website has increased by 183% in the last two months. Google Trends also saw a surge for ‘halving’ searches.
Another critical factor that must be taken into utmost consideration in 2022, is that mining will become more lucrative and less competitive. A lot of miners have been expected to leave the market anticipating dropped mining rewards. Consequently, the competition will drastically decrease and your hardware will find it easier to mine coins.
So far, Bitcoin has outperformed not only other cryptocurrencies but also liquid assets such as gold. In the past few days, Bitcoin has grown by 22%, while the value of gold has dropped by 4%.
Bitcoin’s price fall this year may have led many to think that the price was going off the market. Instead, the price rose to the disappointment of many investors. Many had already sold their coins and could not afford to repurchase them at an increased price.
Bitcoin, so far, has been a solid bet.
How Bitcoin can be a great investment option
Investing in Bitcoin comes with several benefits both for miners and traders. Let’s take a look at some of the benefits of investing in Bitcoin:
One of the best things that make Bitcoin a great choice for investment is its decentralization. There’s no regulating body interfering when you’re making payments through Bitcoin. Unlike banks, you do not have to go through the procedures involved in the traditional banking system.
Bitcoin is free from all government policies and manipulations, which has long protected it from the dwindling and fragile economies regulated by central governments.
Neither miners nor Bitcoin inventors have power over BTC transactions. Transactions made with Bitcoin are irreversible, unlike the traditional banking system. No banks can control or alter these transactions.
Transparency and security
Bitcoin transactions are transparent. You can see what happens to your money every moment as it belongs to a blockchain.
Since the introduction of Bitcoin to the market in 2008, it has never had any major security breach that has shattered the reputation of this altcoin. Many people would expect that the server or wallets of miners are vulnerable to hackers. This isn’t the case because the funds are safely kept in a cryptography system, and only someone that has private keys to the wallet — or the wallet owner — is granted access.
Transactions are pseudonymous
When you want to open a bank account, some documents that contain your personal details would be requested. This makes the whole system centralized. The government can trace your money to the address you penned down while opening your account.
If they observe that you have a considerable sum of money in your account, they may either freeze the account or interrogate you about it. This is one of the reasons people put their funds in Bitcoin and altcoin investments rather than banks. Irregular trades and uncertainties around trading habits have also seen people shifting to altcoins.
Bitcoin transactions are fast
You must have witnessed a scenario inside a bank when customers are asked to wait in long queues before officials attend to them. With Bitcoin, that in-person trip to the bank becomes unnecessary. All you need to do is to set up a Bitcoin wallet and start transacting.
The future of Bitcoin
Governments in the future may have no choice but to declare global safety for crypto miners. With the pandemic ravaging global economies, governments may want to consider cryptocurrencies to revive their economies.
Africa is also seeing rapid adoption of cryptocurrencies. It has the second-highest adoption worldwide. According to a cryptocurrency adoption report, Africa had a percentage growth of 91.47%, much of which was due to Nigeria’s 210.6% growth in young crypto users. At 210.6%, Nigerian youth led the rest of the world in percentage growth of cryptocurrency adoption.
Nigeria’s rate of adoption was far ahead of other top countries in the list, like Australia (+158.07%), Spain (+120.71%), Canada (+112.45%), and Mexico (+97.33%).
Bitcoin uses safe technology, one that is open for others to view and improve upon. Its open-source nature protects it against security breaches. The crypto market has seen a lot of change, ranging from mining costs and ease of mining to the very fluctuating market. However, one thing that remains constant about Bitcoin is the fact that it’s safe, seemingly lucrative, and promising.
Thanks for reading. If you have any questions on investing in Bitcoin, observations, or additional information, let us know in the comment section, and we can start a conversation.
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