A reduction of more than 65% in 2022, Bitcoin (BTC -0.17%) has become an increasingly polarizing cryptocurrency. On the one hand, Bitcoin bears are predicting that Bitcoin could fall as much as 50% in 2023 before reaching a market bottom. On the other hand, Bitcoin bulls think that we have already hit the bottom of the market and that Bitcoin may actually double in value in 2023.
Right now I’m on the side of the Bitcoin bulls. Bitcoin simply has the best risk-reward profile of the major cryptocurrencies. Here’s a closer look at my reasoning.
In terms of risk management, one of the main factors in Bitcoin’s favor is that it has a historical track record of bouncing back from bad years. For example, in 2014, Bitcoin fell 58% before rebounding the following year. And in 2018, the same pattern occurred, with Bitcoin falling 73% before rebounding the following year. So while acknowledging that past performance is no guarantee of future performance, there is at least a historical precedent for Bitcoin’s recovery in 2023.
Moreover, Bitcoin has recovered from at least five different bear market crashes in the past decade. For example, in 2011, bitcoin experienced a stomach-churning “flash crash” that resulted in Bitcoin falling from $32 to $0.01 in a matter of days. In 2015, 2017, and 2021, similar giant market manipulations occurred.
In other words, Bitcoin falling off the cliff in 2022 is really nothing new. This is a big reason why there are so many dedicated Bitcoin maximalists out there who want to buy and hold forever.
The upcoming halving
Is it a historical coincidence that the three worst years of Bitcoin’s existence (2014, 2018, and 2022) happened almost four years apart? Many market analysts believe that there is a pattern in the performance of the Bitcoin cryptocurrency market that is inherently related to the algorithm that governs the circulating supply of Bitcoin.
When Satoshi Nakamoto first created Bitcoin, he implemented a mechanism known as halving, which occurs on a regular schedule. In a halving event, the reward for mining each new block of Bitcoin is halved every four years. Currently, the mining reward for Bitcoin is 6.25 BTC. However, in 2024, this reward will be halved to 3,125 BTC.
In theory, Bitcoin should become more valuable with each new halving. Traders wait for this before the halving and start to increase the price of Bitcoin about 15 months before. With the next halving scheduled for early 2024, that means a rate hike should take place in 2023.
Crypto hedge fund Pantera Capital has extensively modeled this phenomenon and concluded that bitcoin will rise to $36,000 in 2023 and early 2024 before the price climbs to $149,000. If this is indeed the case, now is the time to get on the Bitcoin bandwagon.
Bitcoin as a global phenomenon
Finally, one of the main reasons I am bullish on Bitcoin in 2023 is due to its growing acceptance as a global medium of exchange. With each passing year, Bitcoin becomes more popular as an online payment option. And new countries continue to adopt Bitcoin as a way to accelerate economic growth or improve the economic status of their citizens.
For example, in December, Brazil passed a “Bitcoin bill” that would introduce a comprehensive regulatory framework for how Bitcoin can be used both as a means of payment and as an investment asset within the country. As more countries follow Brazil’s lead, it will only make Bitcoin more valuable than it already is. It’s just simple supply and demand.
Bullish Bitcoin for 2023
Put all these factors together and Bitcoin is the best cryptocurrency to buy right now. It has a long track record of recovering from bad years and market crashes. It has a strong catalyst for price appreciation from 2023 to 2024. And it benefits from the growing global acceptance of Bitcoin as a medium of exchange and form of payment.
Given that Bitcoin has traditionally always led a market higher or lower, if you believe the cryptocurrency will go higher in 2023, you should consider adding Bitcoin to your portfolio right now.