7 Factors Buying Bitcoin Price Will Make You Wealthy
Bitcoin has gone through a wild ride in the last ten years and violated the mainstream media narratives.
It didn’t die in early 2014, when the exchange serving 80% of Bitcoin trading, Mt. Gox, collapsed.
In the years that followed, hackers stole large amounts of Bitcoin from exchanges.
In 2017, Bitcoin went on an incredible bull run to nearly $20,000. Then it crashed. Over 12 months, it fell 83% to almost $3,000. Media called Bitcoin a bubble that had burst and left it for dead.
Bitcoin has survived for nearly 12 years (its “birthday” is Jan. 3, 2009, the date the genesis block was created).
And it didn’t only survive, but it also became more robust. This year, Bitcoin is the best performing asset class, with a 66% increase year-to-date.
According to Nassim Nicholas Taleb’s theory, it’s the very definition of antifragile. If it were fragile, it would have disappeared long ago.
And the best part is that all signs point to a bullish trend in the future. So let me walk you through seven factors why it will continue to thrive.
1. Bitcoin halving
Bitcoin has historically performed exceptionally well 12–18 months after the first two halvings. The reduction in new supply or flow of coins, in the face of growing demand, historically pushed the price up.
Here’s Bitcoin’s historical price chart in logarithmic form, with red dots indicating the earliest price point close to launching and halving. All of which represent the start of the four Bitcoin market cycles so far.
2. Never fallen below the 200-week MA
As you can see in this chart, Bitcoin’s price has never fallen below the 200-week moving average. It rises significantly above the average in the bull markets and has bounced off the 200-week moving average in bear markets.
Additionally, according to the 200-week moving average of Bitcoin, the asset is currently sitting at an all-time high in price.
3. A record number of consecutive days over $10k
In 2017, Bitcoin climbed above $10,000 and stayed there for 62 consecutive days. Yet, it wasn’t sustainable. It was a classic blow-off top in a market that had reached overbought levels.
This time is different.
As of last night, see Bitcoin has established a new all-time high of 88 days.
And it’s a big deal for Bitcoin.
4. Lindy effect
Bitcoin has survived for nearly 12 years.
According to something called the “Lindy Effect,” Bitcoin’s hard-won survival suggests it will endure for at least another decade.
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The Lindy Effect essentially states that the future life expectancy of a non-perishable thing, such as a technology, is proportional to its current age.
If the Lindy Effect holds, Bitcoin could achieve the trust and use required to push prices close to $1 million. However, investors will need to be patient. It might take a couple of decades.
5. Stock-to-flow model
An investing model called Stock-to-flow (S2F) quantifies the scarcity of a commodity. Stock represents the total supply in circulation, and flow represents the amount of new supply per year.
Because Bitcoin is open-source software with a fixed supply schedule, it is possible to measure Bitcoin’s S2F with 100% accuracy. Following Bitcoin’s third halving in May, the current S2F of Bitcoin is 56, roughly the same as gold. However, after the next halving, Bitcoin will be twice as scarce as gold.
A pseudonymous quant trader calling himself PlanB created the Bitcoin S2F. He argues that Bitcoin’s growing scarcity will increase its value. In terms of a Bitcoin price prediction, this model says that the Bitcoin price could reach $288,000 in this cycle if the model continues to hold.
6. Wall Street adoption
Multi-billion dollar institutions are now allocating 9-figures to Bitcoin.
Stone Ridge, a $10 billion asset manager, now owns $115M in Bitcoin. Paul Tudor Jones publicly revealed that he had put 2% of assets into Bitcoin. Billion-dollar public company Microstrategy Inc. raised Bitcoin holdings to $425 million after the second purchase. The largest digital asset investment manager, Grayscale, saw record inflows of $1 billion in the third quarter and now has almost $6 billion in total assets.
Fidelity and the Intercontinental Exchange (ICE) successfully launched cryptocurrency trading offerings for institutional investors in 2019. Just this month, Fidelity said, “Bitcoin is a unique investable asset, and it could be a beneficial addition to a portfolio.” Fidelity is suggesting people increase their Bitcoin allocation to 5% or more.
Cathie Wood and her ARK was the most successful investor over the past five years. She recommends an allocation to Bitcoin, ranging from 2.55% to 6.55%. Way above my conservative recommendation a year ago.
7. Potential ETF approval
Yes, Wall Street is gearing up, but there are only limited ways for large investors to purchase substantial Bitcoin amounts. Without exchange-traded funds (ETFs) many large funds are prevented from getting exposure to Bitcoin.
One powerful example of the impact an ETF can make is gold. The first Gold ETF was approved in 2001 and marked the beginning of a 6-year bull run, resulting in a 700%+ price appreciation.
It is not unlikely that regulators will soon approve the Bitcoin ETF. And if they do, it would offer an effective vehicle for funds and larger investors to get exposure to Bitcoin.
Amazing, isn’t it?
There is no doubt that all these factors are incredibly bullish for Bitcoin in the long run.
Bitcoin is sitting at the point of what long-term investors want to see.
People realized that Bitcoin is an asset to put money and protect yourself against the collapsing global financial system.
On top of that, with Bitcoin, you have unseizable money and hedge against hyperinflation.
So if you have at least a 5-year investment horizon, you will most likely benefit from one of the most outstanding wealth transfers in human history.