Bitcoin (CCC:BTC-USD) prices are once again moving in the right direction after hitting their lowest level since March. Bitcoin rebounded above $57,000 around the time of the release of a weak U.S. jobs report. As of right now, the price of Bitcoin is at $56,187.46.
The U.S. added 266,000 jobs in April, falling well below expectations for a 1 million gain. However, the April jobs miss means that the U.S. economy is still recovering, prompting investors to think that the Fed will continue to fuel the rally across risk assets.
“The reaction from bitcoin is undeniable,” said Mati Greenspan, the founder of Quantum Economics. “Even gold and silver hit fresh highs.”
Still, whatever the short-term moves the digital asset makes, the long-term trajectory is upwards for BTC.
The main reason for that is wider acceptance of cryptocurrency in general and Bitcoin in particular. With every passing day, more financial institutions accept Bitcoin as a form of payment. And there is no way around this simple fact.
Estimates vary at this stage, however, regarding where Bitcoin could go from here. Morgan Creek Capital Management’s Mark Yusko believes the cryptocurrency could reach $250,000 within five years. However, if you are looking for a shorter time horizon, then I suggest you check out Matt McCall’s article on the subject. He predicts that the digital asset can run to $100,000 by the end of the year.
The bottom line is that the bitcoin rally is not going anywhere.
What Is Pushing Bitcoin Upward?
In 2009 a mysterious entity named Satoshi Nakamoto created, devised and developed bitcoin, authored the bitcoin white paper and created and deployed bitcoin’s original reference implementation. Since that time, this digital currency has emerged to become the gold standard for the cryptocurrency space.
For many, Bitcoin is an alternative to government fiat currencies like the U.S. dollar or the euro or pure commodity currencies such as gold or silver coins. But, if you are new to this world, you might wonder why we need cryptocurrency in the first place.
Bitcoin’s unique selling point is its decentralized status, meaning it does not come under any regulatory authority. There is no central bank or government system that issues cryptocurrency as yet—instead, a private network of computers linked through a shared ledger processes BTC payments.
Understandably, big banks wanted nothing to do with this. However, the popularity of bitcoin has forced major financial institutions to rethink their strategies.
As a brief overview, PayPal (NASDAQ:PYPL) and Square (NYSE:SQ) now allow users to buy, sell and hold cryptocurrencies. In addition, the Chicago Mercantile Exchange has launched its “Micro Bitcoin” futures product to build upon a regular futures contract’s successful launch in 2017. And most recently, there are rumors that JPMorgan Chase (NYSE:JPM) is preparing to offer an actively managed bitcoin fund to certain clients that could roll it out as soon as this summer.
The Allure of Bitcoin
When you purchase Bitcoin, you must understand that you are buying into a concept more than a digital asset.
Due to its nature, there are some intrinsic benefits of using bitcoin over fiat currencies. Firstly, when using Bitcoin, you do not need an intermediary authority like a bank or government. You have complete autonomy over your asset. Indeed, this is one of the main benefits of using bitcoin in the first place.
The other major benefit, and one that is quite controversial, is discretion. Theoretically, a user can release information regarding their transactions. Otherwise, these transactions are not easily traceable.
Cryptocurrency exchanges charge “maker” and “taker” fees. However, they are inexpensive in comparison to traditional bank charges. As a result, you do not need to worry about account maintenance or minimum balance fees, or overdraft charges when using bitcoin.
Finally, users can send and receive bitcoins with just a smartphone or computer. So, for populations without access to traditional banking systems, bitcoin is their only way to send and transfer money from one point to another. This is especially important for places like Venezuela that are suffering from financial turmoil.
Bitcoin is here to stay, and its trajectory is onwards and upwards. Some of the experts are still on the fence regarding digital currencies in their present form, though. In an email, InvestorPlace posed the following question to Laura Gonzalez, Ph.D. Associate Professor of Finance California State University, Long Beach:
“The Coinbase IPO last week spurred a number of cryptocurrencies and related equities to new highs in the first half of this week. As blockchain technologies become more commonplace, what are some cryptocurrency investments that look particularly promising for long-term growth? (altcoins, digital wallet stocks, mining plays, trusts/funds, etc).”
She had the following response:
“It is important for investors to consider who is supporting and using the cryptocurrencies they are interested in. In addition, if investors are looking for long-term investment opportunities beyond the short-term “gambling” we are seeing lately, it is important to remember that there is a trend globally towards developing central bank-based e-currencies. That will affect the fundamental value of other cryptocurrencies”
Strong words from the professor. Still, at the moment, there is only China’s version of a digital currency, controlled by its central bank, that has the stability that most experts are craving. But Bitcoin’s utility will far outstrip any form of national electronic money created by a government to monitor an economy and its people.
Hence, the odd bump in the road notwithstanding, it looks like a great time to buy and hold some bitcoin.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.