Is Bitcoin a good investment? A detailed analysis
- Bitcoin is the first cryptocurrency and was built on Blockchain technology. It uses the proof-of-work concept to reward its members.
- Bitcoin uses a peer-to-peer network and has no central authority.
- The Bitcoin ledger is public and anyone can store it on their computer. Anyone can create a Bitcoin token and it can be transferred to any of the wallets, however, the owners of bitcoin addresses cannot be identified, but any Bitcoin transaction made is accessible by anyone, anywhere.
- No approval is required for completion of a Bitcoin transaction. It is made by the network itself without the interference of any third-party system.
- It is a limited resource of 21 million coins of which 19.1 million are on offer
- Bitcoin competitors: Ethereum, gold, national currencies
There are many who think that Bitcoin is actually of zero value. However, given its limited supply and increasing use for payment, it has value
Bitcoin Use Cases
There are 2 main use cases for Bitcoin at the moment. This is different from the use cases for Blockchain which is much more widespread.
- Store of Value: In Layman’s language, Bitcoin is like gold hidden within a computer network instead of a mine in Africa. The creators deliberately created a limited number of them and created a whole series of difficult tasks to achieve them. Just like in real gold mining, Bitcoin mining becomes difficult if several people mine at the same time or because the number of BTC keeps shrinking. That said, it cannot be used as an ornament, one of the great factors driving the value of gold. To solve this problem, the creators designed it in the form of a currency authenticated via a blockchain.
- Payments: In recent years, BTC has been increasingly used as an alternative to the US dollar or other national currencies. It is now accepted for a fee by many companies around the world. While BTC enjoys the absence of central control and therefore any form of voluntary devaluation, it suffers from increased volatility.
Bitcoin: historical performance
Bitcoin has been generating positive returns for most of the last 10 years.
- Bitcoin has generated positive returns in 9 out of 11 years
- 2018 was the most difficult year that also coincides with the year in which the Federal Reserve reduced the size of its balance sheet. During that year, Bitcoin closed 74% less than the previous year. Bitcoin took 3 years to recover.
- Unlike Alts or even Ethereum, Bitcoin has been there for quite a long time and with a proven performance record.
- Earnings years: 2011,2012,2013,2015,2016,2017,2019,2020,2021
- Years of loss: 2014,2018,2022
Bitcoin vs Ethereum, Quarterly Performance Comparison
- Q1: BTC (-3.1%), ETH (-8.2%)
- Q2: BTC (-58.5%), ETH (-54.4%)
- Q3: BTC (-2.8%), ETH +25.8%
- Q4: BTC (-19.1%), ETH (-18.2%)
- YTD: BTC (-67.1%), ETH -71.1%
In the long run, Bitcoin has worked more consistently than Ethereum. However, over the past 3 years, Ethereum has outperformed Bitcoin.
Some people compare Bitcoin to Tulip Mania, while others link it to the Dot Com Bust. However, both Tulip Mania and the Dot Com bubble lasted about three years. Bitcoin has been repeatedly tested in this contemporary era of computers and boom and bust cycles over the past 12-15 years. So, the comparison is fake and Bitcoin will rebound.
Is it the right time to buy Bitcoin?
CrowdwisdomLIVE sales indicator*
- Current Momentum: Negative
- Competitive advantage (liquidity): moderate
- Short-term trading recommendation: sell