The crypto market is a crazy place to be, with altcoins emerging from nowhere and earning huge gains for early investors in a matter of days, only to fall from grace and cause a ruckus on their way down.
In amongst all this volatility, Bitcoin still reigns as the largest and most popular currency in terms of market capitalization as well as media coverage.
Over the past decade, it has gone from being valued at pennies to being traded for tens of thousands of dollars.
Extrapolating from this trend, you could argue that buying and holding Bitcoin for the long term, rather than trying to predict market fluctuations with frequent trading, is the best strategy.
So, does it still make sense to buy large amounts of Bitcoin in anticipation of further gains, or are there other strategies out there that make more sense for investors who are in it for the long haul?
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The importance of branding
We’ve seen just how significant brand recognition is when it comes to determining the fate of cryptos. Without it, coins can either struggle to gain traction in the first place or stagnate once they have lost their initial buzz.
At the other end of the spectrum, meme coins like Doge and Shiba Inu have become victims of their own success, skyrocketing for short periods, only to come crashing down when the joke loses its impact.
Amongst all of this, Bitcoin stands out as an asset that is taken seriously, and which has proven itself resilient year after year. It has been through meteoric upticks in value, only for downward corrections to occur.
It has survived market crashes and come back stronger than ever. And if nothing else, the strength of its brand has helped it to cling on.
This is doubly relevant because, for the mainstream investor who doesn’t know anything about crypto, Bitcoin is essentially synonymous with the market as a whole. And so as more and more people look to pour their cash into crypto assets, Bitcoin is always going to be the first port of call.
In turn, the likelihood of its market cap increasing is high, because it is to crypto what Xerox is to copier machines, or what Google is to online search. While some brands fall victim to this genericization, others thrive, and Bitcoins are very much in the latter camp.
With brand recognition comes confidence, and confidence is key to sustainable success in the crypto market. So as a long-term strategy, buying Bitcoin still looks savvy.
The importance of understanding your investment aims
Another point to make when discussing Bitcoin investments specifically and investment strategies more generally are that you have to think about what your goals are when putting your money into any asset.
For example, let’s say you are hoping to save for retirement, and you want to build up a sizable pot that will support you later in life. Because Bitcoin is treated as a value store, like gold, it could be good to add it to your portfolio.
But what if your investment aims are focused more on the medium-term, such as saving for a house deposit or a car down payment?
It’s trickier to recommend crypto in this context, in part because the implications of capital gains tax might make things more complex and costly.
No investor should put all of their eggs in one basket, or be entirely reliant on the value of an asset they purchase going up.
That said, buying Bitcoin has been a good move for many long-term investors who have held it for years, and lots of experts still see it as an appealing proposition going forward.