In this article, we are going to analyze ten reasons why Bitcoin and other cryptocurrencies are highly undervalued in the long term perspective, reasons that probably will make you rich and financially free in the next future. Cryptocurrencies are money!
1 - Digital scarcity.
Bitcoin is much scarcer than one can think. Technically, it is enough to own 0.27 bitcoins to be in 1% of the world population that can ever own bitcoins. Indeed, if 1% of the total population on earth, 80 million individuals, start demanding bitcoin, they can afford at most 0,27 BTC each, because of the limited number of coins capped at 21 million units. Counting for lost coins, roughly 5 million, makes this equation even more interesting because it states that it is enough to hold 0.22 BTC to be on the top 1%. Moreover, my dear early adopter, think that there are more millionaires in the world than bitcoin in circulation.
2 - Managed assets.
Globally, assets under management are approximately $ 100 trillion. If 2% of these managed assets invested in Bitcoin and other cryptocurrencies, even if only for diversification purposes, this would lead Bitcoin's price to exceed $100.000 and ethereum price to $15.000. From another point of view, if cryptocurrencies reach half of the gold capitalization, which stands at around $7.5 trillion, Bitcoin's price would exceed $190.000, while ethereum would surpass $20.000. Take a look at this representation of all the money in the world!
3 - Portfolio diversification.
The historical series of bitcoin and the other cryptos are not correlated with any asset on the market and this makes them very attractive to the eyes of investors who are looking to diversify their portfolio. In fact, according to modern portfolio theory, two unrelated assets allow for a higher return against the same or lower risk.
4 - MetCalfe's law.
This law tells us that the value of a network is proportional to the square of the number of users. Given that today there are an estimated 50 million users of the Bitcoin network, if this number were to increase by 7 times to 350 million users, the value of the bitcoin and its capitalization would have to increase by 7 ^ 2 = 49 times. The same could be applied to some other good cryptocurrencies, which have even more space for growth.
5 - Long cycle.
According to the theory of the monetary cycles analyzed and used by Ray Dalio, we could find ourselves close to the end of the long-term cycle, which could reasonably have started after the Second World War, around 1945, with the beginning of the Bretton Woods deal. The end of the credit cycle, combined with the recent global pandemic, could represent the beginning of a phase of a long recession and the possibility for the reset of the dollar. In this case, the assets used as a store of value such as gold commodities and cryptocurrencies could perform very well in the next future.
6 - Hyper-inflation risk.
Through monetary policies, the money base grew exponentially during the 19th century for every country, decreasing money's purchasing power. For example, the US national debt during the Second World War was $ 25 billion. Nowadays, the central bank issues over $ 125 billion a day, and the issue rate grows over time. What would happen when a currency with an unlimited cap is positioned nearby a currency with a limited cap? What if it's not Bitcoin that is increasing in value but instead are the FIAT currencies that are losing it? Look here at the increasing national debts. Another interesting historical fact is that the average life of a FIAT currency is 25 years, therefore we are in the middle of the path with cryptos.
7 - Technology
The cryptocurrency's protocols are ensured mathematically against tamper and manipulation. The Blockchain protocol allows to transfer securely billion of dollars in a short time with a fee of a couple of dollars, all around the world. The same transaction made with the Bank circuit would take a couple of days with a fee that could exceed 2 percent or more of that transaction. Moreover, the network of Bitcoin has an uptime of more than 99.98%. Future developments in technology could even increase the discrepancy with FIAT currencies and electronic systems. For instance, with the lighting network for Bitcoin and sharding for Ethereum, transfers would be instantaneous and have near-to-zero costs of transactions.
8 - Widespread adoption coming
"First they laugh at you, then they fight you, then you win".
9 - Chart and cycles
The technical chart of Bitcoin looks really favorable in the long term perspective. Following a cyclical analysis we are towards the middle of a bigger four year cycle, started with the minimum value of $3200. Furthermore, because we had the halving on Bitcoin's supply recently, we could expect an increase in price, with the same level of demand. But remember that the demand could also increase.
10 - Cryptocurrencies are for everyone.
Bitcoin and cryptocurrencies are relatively simple to use (just a connection and a mobile phone) and do not require an identification associated with your person (IBAN) to work. There are no barriers to entry and anyone can use them because they are open to everyone. With Bitcoin and cryptocurrencies you don't have to ask permission to make a transaction and nobody can stop you or steal your money. Cryptocurrencies are not backed by military force. Bitcoin and the others are people's currency.
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