Who would have imagined that a cryptocurrency could be a safe haven investment? This would have been unimaginable a decade ago. Yet, here we are in 2023, and Bitcoin (BTC-USD) looks better than ever as U.S. dollar inflation persists. Plus, Bitcoin can help investors reduce their exposure to traditional banking sector risks. Additionally, there’s a major event happening next year that crypto holders need to know about.
Bitcoin has been around since the mysterious and elusive Satoshi Nakamoto digitally minted the first coin in 2009. Since then, some banks and regulators have been slow to adopt this relatively new form of money.
All of a sudden, Bitcoin is gaining popularity among investors seeking shelter from banking sector turmoil. It’s an unexpected turn of events for people who misunderstand cryptocurrency, but really it makes perfect sense that BTC deserves a place in practically anyone’s long-term portfolio.
Bitcoin’s Limitation Is Its Strength
Since there will only ever be 21 million bitcoins, there is an inherent limit to how much inflation-caused devaluation there can be in the world’s most popular cryptocurrency. It’s a built-in limitation that probably didn’t seem like a big deal upon BTC’s inception in 2009.
Of course, circumstances are quite different in the 2020s. First, there was the Covid-19 crisis, followed by unprecedented stimulus spending, and now there’s persistent dollar inflation.
Granted, 6% year-over-year inflation is better than the inflation rate of last summer. Still, it’s nowhere near the Federal Reserve’s 2% target. Meanwhile, people who store their wealth in Bitcoin instead of cash don’t have to worry about the trajectory of dollar inflation.
Don’t get the wrong idea here. I’m not suggesting that anyone should store 100% of his or her wealth in cryptocurrency. However, the biggest Bitcoin opportunity of the decade is happening right now as crypto continues to shine while dollars deteriorate.
You Can Sidestep the Banking Crisis With Bitcoin
Many people probably never expected a financial sector crisis in 2023. It was a real shock to the system when the 16th-largest bank in the U.S., SVB Financial Group (OTCMKTS:SIVBQ) subsidiary Silicon Valley Bank, famously collapsed in March.
The next thing you know, bank stocks tumbled and fears of system-wide contagion spread. At the same time, Bitcoin headed toward the $30,000 level.
Silicon Valley Bank represents the second-biggest U.S. bank failure, while Bitcoin represents an unexpected safe haven and crisis hedge. Regulators and lawmakers will probably continue to shake their fists at irresponsible regional bank executives. This will only make cryptocurrency and the blockchain look more and more like a viable alternative to conventional finance.
Also, keep in mind that there’s a Bitcoin halvening (also known as halving) event happening a year from now. As the rewards for mining BTC diminish, there will probably be less mining activity. This could lead to a smaller available supply of Bitcoin, thereby putting tremendous upward pressure on the price.
What You Can Do Now
Bitcoin has been much higher than $30,000, so this is probably only a stepping stone. It’s practically inevitable, due to increased adoption over the long run, that BTC will revisit $69,000 at some point.
Until then, you have a prime opportunity with cryptocurrency right now, especially with the halving event coming up next year. Consider it a gift that Bitcoin is still not at its all-time high, and feel free to put at least a small amount of BTC in your portfolio today.
On the date of publication, David Moadel did not have (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.
