Bitcoin has captivated many investors due to its incredible long-term returns, but its volatility has kept some investors on the sidelines. The leading cryptocurrency regularly sees sharp fluctuations that can push it up or down by 10% in a matter of days.
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Not every investor wants to deal with that level of uncertainty, but you can’t question the results if you compare it to popular benchmarks like the S&P 500 and Nasdaq Composite. The cryptocurrency also recently reclaimed $100,000 per coin and may head higher.
If you are on the fence with Bitcoin, these are some of the reasons to consider getting started.
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Bitcoin’s Long-Term Returns Are Impressive
Although Bitcoin doesn’t produce revenue and net income growth like publicly-traded corporations, the returns are unquestionable. Bitcoin has risen by 68% over the past year and has soared by 978% over the past five years.
The S&P 500 and Nasdaq Composite haven’t even doubled over the past five years. Bitcoin has proven to be a viable way to multiply your money. While results are not guaranteed, many investors use long-term returns to assess momentum and investors’ appetite for an asset. Bitcoin has hit the mark for a long time despite the narrative around uncertainty.
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The Big Players Are Getting Involved
Last year was a big one for Bitcoin. Spot Bitcoin ETFs began trading on Jan. 11, 2024, and many financial institutions rushed to offer their own. BlackRock, Fidelity, ARK Invest, VanEck, and Grayscale are some of the firms that launched Bitcoin ETFs.
Each of those ETFs puts more money into Bitcoin, and that leads to upward pressure on the price. Bitcoin ETFs have made the digital currency more accessible for everyday investors, and this trend can catapult Bitcoin higher in the long run.
Bitcoin Strategic Reserves
President Donald Trump established the Bitcoin Strategic Reserve with an executive order. This strategic reserve can boost the demand for crypto and lead to more gains for investors.
While the Bitcoin Strategy Reserve is relatively old news, it can ripple into individual states. For instance, Arizona recently became the second U.S. state to create a Bitcoin Strategic Reserve. It’s possible for more states to follow the trend, and each commitment requires more Bitcoin purchases.
Bitcoin Is an Inflation Hedge
Bitcoin also serves as a valuable inflation hedge that gives it more value as central banks print more money. There are only 21 million Bitcoins available, and it is impossible for anyone to increase the supply. That’s the beauty of Bitcoin’s decentralized blockchain.
Investors who want a historically successful asset that can minimize inflation risk may want to take a closer look at this alternative asset.
The Premise of a Universal Currency Is Attractive
Universal currencies give people more control and allow them to avoid foreign exchange fees. If an American goes to the United Kingdom, they have to pay fees to convert their U.S. dollars into British pounds. Then, if you travel to any country in the European Union, you have to convert some of your U.S. dollars or remaining British pounds into euros.
It’s a cumbersome and expensive process for regular travelers who make frequent purchases. Some credit cards also have foreign transaction fees that hike costs for paperless transactions.
Bitcoin avoids those fees when it is used for purchases. The long-term premise of the cryptocurrency is attractive for people who want to save money on foreign exchange fees. Right now, Bitcoin is still in its early innings compared to fiat currencies. At some point, Bitcoin’s annualized growth rate will slow down. However, Bitcoin’s nature as a universal currency should boost its appeal in the years ahead.
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Sources
Bitcoinist, “Arizona Passes Bitcoin Reserve Bill, Becomes Second US State.”
This article originally appeared on GOBankingRates.com: 5 Reasons You Need at Least 1 Bitcoin
