Digital currencies: Bitcoin was the top investment of the past decade. It could stay that way. The background, opportunities and risks of the rally for investors.
In the past decade, Bitcoin was the top investment with a hardly measurable performance of over 80,000 percent. Twelve dollars invested in 2010 would have grown to over one million dollars by the end of 2019. The chances that it will also become the top investment of the current decade are great.
You shouldn’t expect tens of thousands of percentages anymore, but it could well be a few thousand. In the past year, the first of the new decade, it has already increased by 150 percent. No wonder, the corona pandemic and the support measures fueled by an unprecedented global relaxation of monetary policy confirm its essential purpose as a store of value with built-in protection against inflation across all borders and national currencies.
The scarcity is much greater than the absolute limit of 21 million Bitcoin suggests. The analysis company Chainalysis estimates that of the more than 18.5 million Bitcoin created so far, only 14.8 million are in circulation. 3.7 million are considered lost. This can happen through sloppy handling of the private keys. Only through this do the owners have access to their coins anytime and anywhere. If you lose the private keys, the coins are gone too.
In addition, the crypto trading of the leading payment service providers PayPal and Square alone is currently taking more than the Bitcoin newly created by mining from the market. And the scarcity keeps increasing. The imbalance between increased demand and decreased supply can only be resolved through one mechanism: rising prices.
Is the next rally coming?
To assess the long-term trend, it is worth taking a look at our logarithmic Bitcoin chart. The price development in the two and a half years before the halving in May 2020 is extremely similar to that before the halving in 2016. The course after the Halvings is also amazingly similar so far. About half a year after the 2016 halving, the previous high three years ago was broken. Half a year after being halved in May, Bitcoin is currently close to breaking the previous highs, which were also three years ago.
What happened after the break in 2017 is well known: The Bitcoin price increased twenty-fold within a year. If this analogy continues, Bitcoin would explode to $ 400,000 by the end of 2021. Of course, expectations shouldn’t be that high. But a price rise towards the $ 100,000 mark is not entirely absurd. Especially since the Bayerische Landesbank considered prices of 90,000 dollars to be possible in an analysis more than a year ago. Bitcoin will remain the most spectacular investment in 2021.
The Crypto trading
The disruptive effects of blockchain and cryptocurrencies are often compared to the beginning of the internet age. Some of today’s leading Internet companies have also suffered from serious doubts and corresponding price drops.
Only when buying cryptocurrencies like Bitcoin directly do investors rarely enjoy the fact that profits from a sale are tax-free after more than a year. This does not apply to derivative instruments such as Bitcoin certificates or CFDs, with which one can indirectly participate in the price development. These are subject to the final withholding tax. For this reason alone, investors should purchase cryptos directly. Most often this is done via an account with one of the many crypto exchanges, which are usually domiciled in exotic locations. The associated lack of security discourages many investors. But there are alternatives for crypto trading.
In the past two years, new trading platforms have been launched in this country. What these have in common is that investors do not have to take care of their wallets and private keys themselves. Rather, this is done by separate custody companies with very high standards. Two subsidiaries of the Stuttgart Stock Exchange are leading the way.
Firstly, the Bison app launched two years ago, which enables Bitcoin and four Altcoins to be traded via smartphone. The other is the Stuttgart Digital Exchange (BSDEX). Justtrade recently started trading in Bitcoin and four Altcoins in addition to commission-free trading in stocks and derivatives. The investor only incurs costs due to the spread for the cryptos. It is pleasant for the investor that he can trade shares and cryptos from a depot here.
Small amounts make sense
The upcoming offer from the Bielefeld start-up Coindex could be interesting for crypto savers. In addition to individual stocks such as Bitcoin and Ethereum, investments can also be made in crypto portfolios, similar to a DAX certificate. A unique selling point here will be that investments can also be made in the crypto world as part of a savings plan, similar to what is the case with the popular ETF savings plans.
With the highly volatile cryptocurrencies, it makes sense to regularly invest small amounts instead of a large one-time amount. If you had invested an amount in Bitcoin at the end of 2017, you would be back on the road now, after three years. If, on the other hand, you had split the amount and stubbornly invested a predetermined amount every month, you would now be ahead by well over 100 percent because of the cost-average effect.