Last year, Bitcoin (BTC-USD) appreciated 164%, outperforming traditional assets, such as gold, and the S&P500 despite many crypto-related controversies. Sam Bankman-Fried’s FTX cryptocurrency was eventually pushed into bankruptcy and Bankman-Fried was convicted of fraud. Similarly, Binance and its CEO Changpeng Zhao, pled guilty to breaking U.S. anti-money laundering laws.
However, even with the plethora of bad press, bitcoin holders are better off staying calm and measured. Below are three reasons I believe investors should hold their bitcoin for now.
Bitcoin ETF Approval
Bitcoin surged in 2023 because of bets on SEC approval for Bitcoin spot ETFs. The SEC recently handed down their decision to allow several spot bitcoin exchange-traded products. This was good news for many Bitcoin long-term holders.
Bitcoin spot ETFs will ultimately help to further institutionalize the cryptocurrency, helping more normal investors allocate to it and potentially stabilizing the cryptocurrency as well.
Bitcoin is increasingly being called “digital gold” as investors believe it will gain global acceptance and develop into an endured-value commodity.
With all the turmoil in geopolitical tumult happening throughout the Middle East and in Ukraine, global investors may increasingly seek cryptocurrency assets to store their money.
Continued conflict in the Middle East, for example, has led many leading shipping companies, including Maersk, to abandon their routes through the Suez Canal due to recent attacks by Yemen-based Houthi rebels. That means ships from Asia destined for Europe (and vice versa) are largely electing to go around Africa to access the European continent, making voyages costlier.
Inflationary pressures stemming from the current Red Sea blockage could also push some to adopt Bitcoin as a way to help fend off inflation in local currencies.
Lower Interest Rates
Interest rates were critical to the economic and markets dialogue in 2023. Inflation appeared stubborn the former half of last year but eventually came down significantly by the fourth quarter.
If interest rates were to remain elevated for an extended period of time, many investors would likely lose their risk appetite for assets like crypto, especially when safer treasury bonds are offering high yields.
Because many Federal Reserve officials expect rate cuts in the second half of 2024, the risk appetite of investors and traders may also come back and help sustain the rise in the bitcoin spot price.
On the date of publication, Tyrik Torres 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.
