Investing in 2024: Part 1 Bitcoin

Series Intro

In this series I will zoom into various technology sectors with a focus on potential investment opportunities..

The goal is not to provide investment advice—safer and more stable investment options, such as global ETFs, are often more suitable for the average investor. And the assets that I will address are possibly not even the best one in it’s field.

The idea is rather to put a light on emerging technologies that could see significant growth in the next 10 to 20 years. Again, here we make an educated guess about the growth of the technologies and not necessarily about the growth of the assets highlighted in the series.

Always do your own research, don’t invest money that you can’t afford to lose and don’t take advice from random guys on the Internet.

Bitcoin: A New Asset Class

As digital currencies continue to evolve, Bitcoin is emerging as a revolutionary asset class. With scarcity built into its algorithm and an increasing demand from institutional investors, the value of Bitcoin is projected to grow exponentially.

Understanding Bitcoin Technology

Bitcoin was introduced in 2008 through a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” by an anonymous entity known as Satoshi Nakamoto. The white paper outlines a system for electronic transactions without relying on trust, using a decentralized ledger called a blockchain. The blockchain ensures the integrity and chronological order of transactions, making it extremely difficult to alter past records.

Key Features of Bitcoin Technology:

1. Decentralization: Bitcoin operates without a central authority, relying on a network of nodes to validate and record transactions.
2. Cryptographic Security: Bitcoin uses cryptographic techniques to secure transactions and control the creation of new units.
3. Fixed Supply: Bitcoin’s supply is capped at 21 million coins, creating scarcity that can drive value appreciation.

Lightning Opens the doors for Micro-Transactions

A significant development in the Bitcoin network is the adoption of the Lightning Network, a layer-2 solution designed to facilitate faster and cheaper transactions. The Lightning Network addresses some of Bitcoin’s scalability issues by enabling off-chain transactions.

How the Lightning Network Works:

• Payment Channels: Users can create payment channels between each other. Transactions within these channels are instantaneous and cost-effective.
• Network of Channels: Multiple payment channels form a network, allowing users to transact with anyone else in the network indirectly.
• Off-Chain Transactions: Most transactions occur off-chain and are only recorded on the blockchain when the channel is closed, reducing the load on the main Bitcoin network.

The Lightning Network makes Bitcoin suitable for micro-transactions, which are essential for applications like AI-based companies and other industries requiring frequent, small-value transactions. However, it’s crucial to note that Bitcoin faces competition from other cryptocurrencies in this space.

Projected Growth of Bitcoin

Several notable figures have predicted substantial growth for Bitcoin. Michael Saylor, a renowned entrepreneur, anticipates an average growth rate of 20% per year. Cathy Wood, the CEO of Ark Invest, foresees that Bitcoin could reach a staggering $3.8 million by 2030. Be aware that these are predications based on some market assumptions that might not come to light. There is no guarantee that this growth will be reached. But given the potential upside compared to the downside, it is worth the risk of putting a small percentage of your assets into Bitcoin.

At the time of writing, the USD value of Bitcoin is $66,000. If Cathy Woods projection would become reality, the upside is 5700%. If Bitcoin value goes to $0, the downside is 100%.

Investing in Bitcoin: A Variety of Options

Bitcoin offers numerous investment opportunities. Here are some of the ways you can invest:

Direct Purchase of Bitcoin

You can buy Bitcoin directly on an exchange. This method allows you to own the currency outright and benefit directly from its appreciation.

Coinbase (NASDAQ: COIN)

Investing in Coinbase stock is another option. Coinbase currently holds 80% of the Bitcoin ETF, making it a significant player in the Bitcoin market. Buy investing in Coinbase we anticipate that the company benefits from the overall market growth. Be aware that cryptocurrency exchanges are still in a regulatory grey zone and could be affected by new regulations. Also there is the risk of cyber attacks. If a cryptocurrency exchange would get compromised, the stock value might drop drastically.

Microstrategy (NASDAQ: MSTR)

Microstrategy, a company owning 214,000 bitcoins at the time of writing, is another viable investment. As the value of Bitcoin rises, so does the worth of Microstrategy.

Block (NYSE: SQ)

Block, a company founded by former Twitter founder Jack Dorsey, develops tools in the Bitcoin ecosystem, making it a promising investment.

Bitcoin ETF

If you’re wary of exchanges and the complexities of self-custody of Bitcoin, investing in Bitcoin ETF could be an option. However, it’s important to check your local legislation for allowances and tax implications.

Disclaimer

While Bitcoin presents exciting investment opportunities, this is not investment advice. Investments are always at your own risk. It’s crucial to do your own research and consider your financial situation before investing.