Bitcoin (BTC-USD) has taken a real beating in the past several months, but it is still ticking strong. BTC crypto is poised for a major rebound, especially if the Ukraine war keeps dragging on.
For example, the war could actually lead investors to look for uncorrelated asset classes like cryptocurrencies. And Bitcoin is the largest crypto out there, still with a $734 billion market capitalization, according to Coinmarketcap.com.
So far this year Bitcoin has been in a slump, down about 19% to $38,836 as of Monday, March 14, from $46,726 on Dec. 31. This is also after it has drifted down from its peak on Nov. 7 of $67,655. That represents a drop of 44% from this peak price.
As a result, some investors now think BTC crypto could be at a bargain level.
Institutional Interest in Bitcoin
For example, Cryptoslate recently reported on March 11 that a “whale” just purchased $1.17 billion of Bitcoin on Coinbase Global (NASDAQ:COIN). The likely institutional buyer then immediately moved it into an anonymous digital wallet for safekeeping.
The assets were actually in Coinbase Pro, a premium service for Coinbase. Several large chunks of Bitcoin, transferring close to 10,000 BTC crypto each, were sent to an anonymous digital wallet. That is why Cryptoslate believes it could be the work of an institutional buyer.
This information is available to users of Whale Alert, a large crypto tracking service. Whale Alert put out three tweets that informed the public that three transactions of over $300 million each had just occurred on March 11.
Institutional investors could potentially be interested in Bitcoin as an alternative store of value. This is because investors now see inflation as now spiraling out of control.
On March 10, the Bureau of Labor Statistics in the U.S. reported that inflation had reached 7.9% in the last 12 months. This is up from 7.5% in the prior month and 7% in the month before that. In fact, this is now the sixth month in a row that trailing annual inflation has risen over the prior month. Inflation is now up from 5.3% in August 2021
It is probably not uncorrelated that this transaction occurred right after the huge increase in inflation was reported. Institutional investors are looking for ways to make their assets uncorrelated to major market-moving actions and events.
What To Do
At $38,836, most people cannot afford to buy 1 BTC crypto token. But they can always buy a fractional share of that token on all crypto exchanges out there as well as most brokerage firms that allow it.
The truth is that there is mostly speculative value in Bitcoin, not so much utility value, as a recent Barron’s article points out. The speculative value relates to its ability to act as a store of value. But given how volatile the crypto has been in the past year, one has to assume that the “store” of value probably relates more to the long-term.
The article quotes extensively from a long-time Bitcoin and cryptocurrency bull named Alex Pickard. He made his money by mining in Bitcoin and has been buying BTC crypto for a long time.
Holding crypto during hard times has taken on a new name — called “hodlng.” This refers to holding on, but for an extended time frame through all the ups and downs, through the obvious misspelling of the word “holding.”
So, investors who want to hodle Bitcoin can expect a volatile ride, but probably also a potentially higher price compared to other asset types. The bottom line is that investors in BTC crypto for the long term should try to average down into price while it is weak as it is today.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
