Bitcoin has come a long way since 2014, when the cryptocurrency was being traded on the former Magic: The Gathering Exchange for collectors of the playable card game. It was only then that the first generation of altcoins, competing cryptocurrencies offering different features and benefits, began to enter the new segment Bitcoin had created.
Today the cryptosphere abounds with thousands of competing altcoins. Meanwhile, the original cryptocurrency, Bitcoin remains the most popular and one of the priciest. It has also graduated firmly into the ranks of cryptocurrencies attracting the interest of corporate America and institutional investors.
Why Bitcoin Is So Popular
Bitcoin is so popular as it is today— with adoption expanding at an accelerating pace— for a number of reasons. Bitcoin is a peer-to-peer cash payment system with some other cool features because it issues and accounts for all of its own currency.
The fact that Bitcoin is a peer-to-peer cash payment system is innovative and valuable in itself. As a P2P network, it cannot be stopped or regulated out of following the Bitcoin Core implementation’s software protocols. Its users also have a great degree of privacy.
The alternative to traditional institutional banking that Bitcoin aimed to offer from the outset was decentralized, trustless, permissionless, nationless, borderless, uncensorable, immutable, and relatively fast to fulfill new transaction orders.
Additionally, Bitcoin has currency supply that is hard limited to 21 million BTC that will ever be created. Once that limit is reached, no new bitcoin will be created. Bitcoin is programmed to issue half the new supply of coins every four years until the limit is reached.
This digital scarcity makes bitcoin a deflationary currency, with value that increases because of its scarcity. This has attracted massive capital inflows from investors over the last decade. The incredible capitalization has cemented bitcoin’s value as a precious digital commodity.
Is Bitcoin Going to Become Obsolete to New Cryptocurrencies?
Many newcomers to cryptocurrency and beginning crypto investors will come across articles by promoters of different alternative crypto coins that claim Bitcoin is going to be made obsolete by newer cryptocurrencies that innovate along the same lines, but with a second mover advantage.
Their main arguments are usually: 1) The newer altcoin will be faster and use less energy than bitcoin by using some proof-of-stake consensus mechanism instead of the processor intensive proof-of-work method bitcoin pioneered; 2) The new altcoin will be more secure and/or more private than bitcoin; and 3) The new altcoin will be more programmable for different features so it will find more use cases and reach mass adoption sooner, eventually leap-frogging bitcoin.
Their arguments miss the reason why Bitcoin remains the most capitalized cryptocurrency by far, and do not address it or attempt to refute it.
The fact that Bitcoin is slower, uses more energy, does its job on an open, distributed network, and does not easily change to be programmed are precisely the features that make it so valuable to the markets that have capitalized it.
Why do long term Bitcoin holders invest in bitcoin?
Long term bitcoin holders invest in BTC because they believe it is a durable long term store of value as a cryptographically secured holding on a massively parallel accounted public ledger.
They may believe it is an interesting way to advance the capabilities of the not for profit open source software sector, that releases its software for free and allows users to copy, edit, adapt, and redistribute the source code in any way. Or they may want to support creating a decentralized global cash network that can provide a safety net to the world’s unbanked population.
They may also keep some of their savings in bitcoin to make a speculative investment for ROI to shelter their wealth from inflation, and grow it in a disruptive, valuable new technology.
When Is The Best Time to Buy Bitcoin?
The best time to buy bitcoin is when the exchange rate for bitcoin is at or near a cyclical market low price. That maximizes returns on your acquisition the entire way up the chart to bitcoin’s next cyclical high price, whether that’s months or a couple years later.
Buying bitcoin when the price has just recently been going up drastically for some time is what traditional stock market investors call buying into strength and it is a trend following strategy that can quickly trip up on retracements and corrections.
How to Use Bitcoin Rainbow Charts
Bitcoin Rainbow Charts helps steer investors clear of emotional trading decisions at both ends of the market cycle. In the overheated market, the chart recommends Sell. In an oversold market, the chart recommends Buy. In a market average of the logarithmically adjusted historical price of bitcoin, the chart recommends Hold.
While the Bitcoin Rainbow Chart isn’t investment advice, it does help calibrate new investors’ mindset toward not being greedy during the euphoria stage of bull markets, and not being bored or afraid during cycle bottoms.
