As the oldest and biggest cryptocurrency in existence by market cap and exchange volume, Bitcoin has always been highly popular with investors. However, as the industry progressed and new coins entered the circuit, intensifying the competition, Bitcoin began to lose some of its appeal. Investors started to look elsewhere for the next big crypto as newer projects promised to provide better performance and higher returns than Bitcoin.
Bitcoin maintained its position as a leader, and people continued to buy Bitcoin on exchange platforms like Binance. However, fluctuations in the market and the numerous scandals that plagued the crypto industry, as well as the onset of the latest crypto winter caused investors to lose their faith in crypto and Bitcoin’s potential.
And yet, things seem to have taken a turn for the better lately. A recent industry report conducted by the financial services company deVere Group reveals that Bitcoin is the top choice for wealthy investors. Based on the study’s findings, nearly 82% of millionaires are interested in investing in Bitcoin. The number of high net-worth individuals (HNWI) who have consulted with their financial advisors about including Bitcoin in their investment portfolios has increased significantly over the past 12 months, although the market is not exactly in its best period.
Bitcoin is as volatile as ever and has lost much of its value since the crypto winter began, but this doesn’t seem to stop people from investing in it. So, one can’t help but wonder why HNW investors are once again pouring cash into Bitcoin. Fortunately, experts might be able to shed a bit of light and provide some answers in this respect.
Those of you who are familiar with the original crypto already know that Bitcoin has a maximum total supply of exactly 21 million. This limit was set by the network’s founder, Satoshi Nakamoto, in order to ensure scarcity, and cannot be exceeded. However, new Bitcoins don’t enter circulation randomly – this process is conditioned by mining and halving. Miners have to solve complicated cryptographic puzzles to win Bitcoin rewards, and the amount miners receive for processing transactions is cut in half once every four years through an event called halving.
Wondering what this has to do with investors’ interest in Bitcoin? By analyzing the coin’s historic price fluctuations, experts have come to the conclusion that Bitcoin reaches its lowest point approximately one year and a half before the next halving and then starts to appreciate as the event draws near. Since the date for the next halving was estimated for May 2024, it means that Bitcoin’s value might start to increase in the following months. This gives investors a good reason to jump on the bandwagon now when the price is relatively low so they can enjoy high returns when the next bull market begins and the Bitcoin price surges again.
Some consider volatility to be crypto’s biggest drawback. Others see it as its biggest advantage. The truth is volatility can be both a good and a bad thing, depending on investors’ risk tolerance and the strategies they employ. This creates the potential for high returns but also increases the risk of losses.
In terms of volatility, Bitcoin is no different than other coins in the market. Bitcoin’s price fluctuates a lot, with significant spikes and crashes over time. This can be a problem for smaller investors, as they can lose a big part of their assets in one blow. That’s why portfolio diversification is so important, as well as limiting crypto investments to under 5% of the overall portfolio. But for HNWIs volatility is not as scary. They have enough financial power to weather the ups and downs of the market, so they can afford to put their funds on the line and wait patiently for Bitcoin to appreciate over time.
Although Bitcoin is just as volatile as any other crypto out there, it seems to be less affected by the regular cycles of rise and decline, also known as bull and bear markets. While many crypto projects collapse during bear markets never to recover again, Bitcoin has the ability to bounce back after a prologued period of decline. The king of crypto has built resilience over time, and that’s exactly the type of cryptos that investors are looking for in times like these.
HNWIs understand that an established cryptocurrency like Bitcoin is better positioned for long-term appreciation and is a much safer investment vehicle than newcomers. So, even if Bitcoin is not in the best place at the moment, there’s a high probability it will soon recover, and when that happens, those who had the foresight to invest in it will be able to reap the rewards.
In the past few years, a growing number of organizations and institutions have started to accept crypto as a viable alternative to fiat money. What’s more, major companies like Tesla, Google, Microsoft and Amazon have added cryptocurrency to their portfolios. This proves that digital currencies are moving further away from the fringes of the financial system and closer to mainstream acceptance.
If crypto represents the future of money, Bitcoin is going to play an increasingly important role in the financial scene in the years to come. So, it makes sense for HDWIs to want to become part of the new era of finance and gain an early advantage. Bitcoin has already been accepted as a legal tender in El Salvador and the Central African Republic, and it’s very likely that other countries will follow suit in the next years. Because of this, regulators also have their eyes on the cryptocurrency market, and Bitcoin in particular, and are currently looking for solutions to introduce rules and guidelines that could reduce risks and ensure greater stability.
As you can see, there are plenty of reasons for HDWIs to invest in Bitcoin right now. But only time can tell if they’ve made the right decision and if their investments will pay off eventually.