Is Bitcoin a buy in 2023?

by James · November 19, 2022

Even after the monumental price drop of 71% over the past 52 weeks, Bitcoin (BTC -0.60%) has continued to produce amazing returns of over 12,300% since April 2013 (the earliest time when price data for the token is available on coinmarketcap.com). This performance far outpaced the return of the broader market S&P 500 index in the same period. And investors who may have missed out on that performance may be asking whether they should get in now.

Here’s why I don’t think it’s too late buy Bitcoin as we enter 2023. In fact, it’s probably still early.

It has been a tough year

The unprecedented levels of fiscal and monetary stimulus that the government and the Federal Reserve deployed to support the US economy during the coronavirus pandemic, coupled with persistent supply chain problems and shortages caused by geopolitical conflicts, have combined to produce high inflation in the US and around the world over the past year and a half. To combat this, the Federal Reserve has aggressively raised its benchmark interest rates, causing investors to sour on riskier assets, a category that Bitcoin and cryptocurrencies belong in. And this is one of the main reasons why the prices of these assets have cratered in 2022.

In addition, have melting down of FTX, one of the largest crypto exchanges, has created panic in the crypto market. Since news broke that FTX was having major liquidity problems and wanted to be bought out by larger rival Binance, Bitcoin’s price has fallen 8% (at the time of writing), further driving 2022’s downtrend. FTX has now filed for Chapter 11 bankruptcy protection, and the market will deal with the consequences of this scandal for a long time.

The FTX situation could actually prove to be a catalyst for Bitcoin as it could accelerate the implementation of a clear regulatory framework for cryptocurrencies. But as the head of the Securities and Exchange Commission has previously argued that Bitcoin is a commodity, not a value, the top cryptocurrency is likely to be untouched by any new regulations.

This much-needed regulatory clarity will make Bitcoin a more attractive investment for institutional investors, which could lead to huge capital inflows into the asset, possibly boosting its price in 2023.

Bitcoin has a huge upside

While Bitcoin was originally created in 2008 as a “peer-to-peer electronic cash system,” with the first block of transactions confirmed in January 2009, its adoption up until this point has really only been as a tool for financial speculation. And this makes sense, given that volatile and high-flying tokens attract people looking for quick profits.

But I think it’s worth looking at Bitcoin through the lens of it being a store of value – something investors can use to put their savings in. Most crypto enthusiasts know that there is a hard limit of 21 million tokens on the total number of Bitcoins that can ever be extracted. The limited supply should in theory support a higher price over time when demand increases. And as the world becomes increasingly digital, younger generations are likely to look to store their wealth in innovative assets like Bitcoin as opposed to gold.

While many people in developed countries where there is easy access to robust payments and financial infrastructure may not really appreciate Bitcoin’s potential, those in poorer countries certainly understand its benefits. Take Venezuela as an example. The South American country is notorious for going through periods of hyperinflation that have wiped out the purchasing power of the bolivar. In this unfortunate situation, a Venezuelan citizen would undoubtedly prefer to keep their savings in Bitcoin as opposed to the local currency. At least with Bitcoin, there is no way a central authority can manipulate its value.

Additionally, Bitcoin may one day cement itself as a reserve currency, meaning it can be used to settle transactions. Much progress still needs to be made on this front, especially in terms of transaction speeds, fees and user-friendliness. But the potential is definitely there, especially when you consider the unchecked, and often harmful, control that governments have over money supplies and financial systems. Having a truly decentralized payment system would, in my opinion, be a net benefit to the world.

It’s probably a good idea to let the FTX tidal waves calm down a bit before taking action, and you might want to wait for some progress on the regulatory front as well. That is why a Bitcoin investment in November 2022 can be a shot. But brighter days are coming and the perfect buying window for Bitcoin should open soon.

Bitcoin still has a long way to go, which arguably makes 2023 the perfect time to invest for those who have been waiting on the sidelines. With the price down about two-thirds this year, the upside is massive.