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The Ultimate Cryptocurrency to Buy with $1,000 Today
Bitcoin (CRYPTO: BTC) has seen wild fluctuations over the past three years. The world’s top cryptocurrency hit $69,000 in November 2021, dipped below $16,000 a year later, then hit an all-time high of $73,750 last March. But as of this writing, the price of Bitcoin has returned to around $64,000.
These sharp price fluctuations could make Bitcoin appear like a risky investment for small retail investors. But with just $1,000, investors can still buy fractions of Bitcoin or shares of Bitcoin exchange-traded funds (AND F). Let’s review the main factors behind Bitcoin’s volatile price swings – and why it’s always a good idea to invest at least $1,000 in the cryptocurrency.
Image source: Getty Images.
What happened to Bitcoin in the last three years?
In 2021, a combination of stimulus checks, the growing popularity of free trading platforms like Robinhood Markets, social media buzz and fear of missing out (FOMO) have sparked a buying frenzy for meme stocks and cryptocurrencies. Low interest rates have also made it easier to finance the development of speculative cryptocurrency projects.
But in 2022, inflation has pushed the Federal Reserve to aggressively raise its benchmark interest rates to their highest levels in more than two decades. These sudden rate hikes pushed investors toward more conservative investments and triggered a “crypto winter” that cooled market demand for Bitcoin and other cryptocurrencies.
Yet the price of Bitcoin has stabilized and more than doubled over the past 12 months, driven by three tailwinds. First, the United States Securities and Exchange Commission (SEC) approved the first 11 spot-price Bitcoin ETFs in January. These approvals have made it much easier for retail and institutional investors to invest in Bitcoin, and the six largest spot-price ETFs now hold a total of $58 billion in assets under management. Hong Kong’s Securities and Futures Commission (SFC) is also reportedly preparing to approve the region’s first spot price ETFs for Bitcoin and Ethereum.
Second, the bulls were looking toward the upcoming Bitcoin “halving,” which would cut Bitcoin mining rewards in half every four years. The next halving will take place around April 19 or 20, and this reduced supply is expected to stabilize the Bitcoin market price.
Finally, the Fed could cut interest rates this year if inflation slows. If this happens, investors could once again turn to Bitcoin and other cryptocurrencies. The rate cut is also expected to soften the dollar’s strength and increase the value of Bitcoin in US dollar terms.
Why Could Bitcoin Price Remain Volatile for the Rest of 2024?
These long-term catalysts could eventually drive Bitcoin’s price to new highs, but the cryptocurrency could face unpredictable headwinds throughout the rest of the year.
The story continues
Federal Reserve Chairman Jerome Powell recently warned of a “lack of further progress” in his goal of reaching an inflation rate of 2%. This grim statement suggests that the Fed is not yet eager to cut interest rates – and that investors may turn away from Bitcoin and other cryptocurrencies as long as those rates remain high.
Meanwhile, many of Bitcoin’s catalysts – including its ETF approvals, institutional buying and halving – could already be priced into its price. Therefore, the lack of a short-term tailwind could cause the Bitcoin price to stagnate or fall this year.
Why should investors still invest $1,000 in Bitcoin today?
But despite these short-term challenges, I think it still makes sense to invest $1,000 in Bitcoin or a Bitcoin ETF and simply forget about your investment for a few decades. During this period, inflation is expected to erode the value of the U.S. dollar and other fiat currencies, while Bitcoin, gold, silver, and other assets are expected to retain their value or become more valuable.
Once the price of Bitcoin stabilizes, more businesses are expected to accept it as a payment option. Its ability to circumvent unfavorable exchange rates could make it a popular option for cross-border trade, while countries facing crippling inflation could follow El Salvador’s lead and adopt Bitcoin as their national currency. Simply put, a $1,000 investment in Bitcoin today could yield life-changing gains in just a few decades – but only if you ignore its short-term fluctuations.
Should you invest $1,000 in Bitcoin right now?
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin and Ethereum. The Mad Motley has a disclosure policy.
The Ultimate Cryptocurrency to Buy with $1,000 Today was originally published by The Motley Fool