KEY POINTS
A survey showed that 74% of institutional investors plan to invest in Bitcoin at some point in the future.
Major financial and technology companies, including Alphabet and Mastercard, are increasingly involved in crypto. A possible slowdown in interest rate hikes by the Federal Reserve could be a boon for Bitcoin.
This is why Bitcoin's performance in the coming year may look more like its 2021 bull than its 2022 bull. After a 59% return in 2020 and a 60% return in 2021, a 67% annual decline is clearly not the kind of performance Bitcoin investors (BTC 4.37%) expected in 2022.
But as famous investor Peter Lynch once said, "The key to making money in stocks is not to be afraid of them." Although Lynch was talking about the stock market in the era before cryptocurrency arrived, his advice is just as prescient for today's crypto investors. Many investors are selling their crypto assets, including Bitcoin, during the current crypto winter, and for every trader there is a buyer, and long-term investors. buy Bitcoin they are those who believe in the Bitcoin Future.
Rising interest rates and the end of monetary easing are the main reasons for Bitcoin's pullback. However, the future may look more like 2021 than 2022 for Bitcoin based on several recent developments. Here are three reasons why the coming year could be good for the best digital assets.
1. The company is coming...
First, more and more institutional investors invest in Bitcoin as they come to view cryptocurrency as a legitimate particular class, with Bitcoin being the largest (with a market capitalization of 300 billion dollars) and the most attainable.
According to the annual Fidelity Digital Assets survey conducted by the investment giant Fidelity Management, 58% of investors in the surveyed companies bought cryptocurrency in the first half of 2022. Also, 74% of respondents said they plan to invest in cryptocurrency at some point in the future. And not a small sample, as Fidelity surveyed 1,052 corporate fund managers in North America, Europe and Asia. These institutional investors have much more purchasing power than the average retail investor, and their growing presence in the market can theoretically drive the price of Bitcoin higher.
Citing this growing demand from large investors, Bank of New York Mellon (BK 4.68%), America's oldest bank and the world's largest bank, said it will begin offering services care for Bitcoin due to high consumer demand. BlackRock (BLK 13.47%), the world's largest asset manager, said it will work with crypto exchange Coinbase (COIN 10.74%) to offer traders who also hold Bitcoin on Coinbase.
2. ... and the blue chip industry too
At the same time, the use of Bitcoin is heating up among large technology companies and financial institutions. For years, critics of Bitcoin have tried to undermine its value as an investment by saying that it doesn't have many uses. This is starting to change, and fast. Google parent Alphabet (GOOG 7.75%) (GOOGL 7.58%) recently said it will allow customers to pay for Google Cloud using Bitcoin along with many other cryptocurrencies, while Mastercard (MA 6, 85%) announced plans to - work with crypto power Paxos still. help traditional banks offer crypto trading and investing on their platforms.
3. Fed Easing of Rate Hikes Could Boost Bitcoin
The Federal Reserve began aggressively raising interest rates in 2022 in an effort to fight inflation, with the outcome yet to be determined. One thing rate hikes have managed to do is depress many long-term assets like Bitcoin and tech stocks. After the interest rate was raised from 0.25% to 0.5% in March to 3.75 to 4% in the high rate band, many market watchers think that the Fed will finally reduce the rates in 'some time in the near future. If the Fed takes its foot off the accelerator and allows rates to stabilize, that should make investors feel comfortable going back into assets like Bitcoin.
Skate and puck
Finally, 2022 has been a painful year for Bitcoin investors. However, like the original asset class that is still the most feared currency today, its value has continued to be higher than expected, due to the turmoil in which traditional financial markets have fallen. Looking ahead, 2023 is shaping up to be a big year for Bitcoin. At the very least, it should be better than 2022, due to increased investment from large corporate investors, growth from global technology and financial institutions, and the environment financial accommodation from the Fed. Bitcoin is always a risky investment, but I believe that all investors can benefit from a small investment in Bitcoin.
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