What is the future of Bitcoin? Is it a wise decision to invest in Bitcoin?
Well, Actually, I am still relatively new in terms of investment, especially in Bitcoin. But based on personal experience and references I've read, Bitcoin is something worth investing in.
Future
No one knows for sure about this because Bitcoin is still a new technology, even though it's almost 10 years old. Bitcoin is arguably a success if it has been widely adopted by the community, both as a medium of exchange and as a digital asset to replace gold. Unfortunately, the following are still obstacles:
- Energy consumption.
Bitcoin transaction processing, also called mining, requires very high electricity consumption. Recent studies [1] say that the electricity consumption of the Bitcoin network worldwide is estimated to have equaled electricity consumption in Ireland for a year!
- Regulation.
The absence of a central party that regulates circulation and oversees Bitcoin transactions makes many countries prohibit their use for buying and selling transactions, including in Indonesia. Recently, the Bank of International Settlements published its critique [2] of Bitcoin which is considered no better than the currency issued by the central bank. In terms of investment, both SEC and CFTC in the United States still cannot provide clear rules, so there are not many big investors who dare to invest here.
- Speculation and manipulation.
The absence of clear regulations, coupled with a relatively small market size compared to the capital market or commodity market, makes the Bitcoin investment market vulnerable to speculation and manipulation by certain parties. Recent studies [3] reveal that there has been manipulation that has caused Bitcoin prices to skyrocket at the end of 2017, especially with regard to the Tether (USDT) issuance, a digital currency whose value is set at 1 USD, which is used to buy Bitcoin and is considered to have pumped up the price . At present the price of Bitcoin has dropped by around 65% from its highest figure so that market confidence in this currency is increasingly eroded.
Even so, not a few parties still believe in Bitcoin, especially visionaries, both from investors, entrepreneurs, and programmers. Some of the things that happened recently have even brought fresh air to the development of Bitcoin, including:
- Lightning network technology that allows instant processing of Bitcoin transactions without the need for high electricity consumption. Currently in beta testing.
- More and more startup companies are serving Bitcoin purchases. Some of them are supported by well-known investment companies. These startup companies include Coinbase, Circle, Robinhood, Square, and many more. If market confidence is restored and regulation is issued, then the demand for Bitcoin will rise very quickly because the entrance is scattered everywhere. In some countries, there are even ATM machines, such as in the Netherlands and Australia.
- Economists cannot deny that Bitcoin can be a solution for countries with unstable currencies. Wences Casares, an Argentine entrepreneur, strongly believes in Bitcoin because of his personal experience with the peso currency which suffered a massive devaluation in the past. He founded Xapo, the largest custodian company for Bitcoin with a total of 10 billion USD in deposits which were hidden in locations spread across five continents to ensure its security.
I personally still believe in the potential of Bitcoin, especially to serve interstate transactions that are of great value and as digital assets. Bitcoin monetary policy from the beginning was designed to experience constant deflation because the amount was limited to 21 million pieces. This is different from the money that can be printed at any time, according to the needs of the central bank.
investment? Wise or not the decision to invest in Bitcoin really depends on the timing and investment strategies of each. Investors who buy Bitcoin in 2011 can be ascertained rich now. But the one who bought it earlier this year must be frustrated now because the value has fallen by more than half.
Bitcoin is actually an attractive investment choice to be included in the portfolio because it is a new asset class that has unique characteristics so that its correlation to other assets such as stocks and bonds is very, very low.
Its very high volatility does make the risk of investing in Bitcoin become far greater than other assets. However, if you look in the mirror from the past, Bitcoin promises a very high return, so the Sharpe ratio is far above even the most successful stocks in the same period. This high return is considered commensurate to compensate for the risk.
In terms of fundamental analysis, Bitcoin technology has great potential as described above. In terms of technical analysis, many believe that the price of Bitcoin will be difficult to drop to under $ 4500- $ 5000 because that is the average price needed to mine one piece of Bitcoin.
Disclaimer: the information in this article is not a recommendation to buy or sell certain digital assets. All investment decisions and risks remain the responsibility of each investor.