After Its value plummeted by nearly 65% in 2022, a total disaster, Bitcoin (BTC -0.27%) it is off to a blazing start in 2023. In fact, Bitcoin Recently, it had its best January performance (up 39.4% since 2013). This is particularly impressive considering the fact that many analysts were bearish about Bitcoin’s prospects for the new year.
Although There are several tokens that are outperforming it right now, Bitcoin is my top pick for the year. Bitcoin It has a solid track record of bouncing back from bad years, and I don’t think 2023 will be any different. Here’s why.
Bitcoin’s Potential for Growth
For starters, one thing is certain: Bitcoin’s potential for growth is tremendous. Cathie Wood of Ark Invest recently updated her price target for Bitcoin. The cryptocurrency’s vast growth opportunities in eight distinct markets was a major reason why it has risen to $1.48 million (up from $1 million last year). According to Wood, Bitcoin has the potential to account for as much as 10% of one important measure of money supply for emerging markets by 2030, and 25% for the global remittances industry. Additionally, Bitcoin could make up as much as 6.5% of institutional investors’ portfolios.
Image source: Getty Images.
These are the most recent predictions for Bitcoin, and they match what we’re seeing on the global financial market. When it comes to emerging markets, for example, Bitcoin’s use as an alternative to fiat currencies continues to gain traction. At the end of 2022, Brazil passed a comprehensive crypto legislation that opened the door for Bitcoin to be used to purchase goods and services or as an investment asset. This makes sense given that Brazil is the 12th largest economy in the world. According to Ark Invest, the cryptocurrency could account for 10% of M2 money supply in emerging markets.
We can also observe that Bitcoin has become a major risk asset. In January, Goldman Sachs (GS 2.29%) proclaimed that Bitcoin was the most profitable investment tool on an absolute and risk-adjusted basis. In other words, investors should be willing to take the highest risk for the biggest return. Bitcoin is the best bang for your buck. This aligns with what we’ve seen from institutional investors, who now view cryptocurrency as just another risk asset. Last year, Coinbase (COIN 1.27%) made it easier for institutional investors to enter the market with a suite of new services.
Waves recently partnered with BlackRock (BLK 1.36%) which allowed institutional investors access to crypto investments. This pattern is likely to continue in 2023.
Potential Risks
When making an investment decision, you must take into account more than just the potential for upside. Potential risk must also be considered. Bitcoin was notably unaffected when FTX (FTT -0.85%) collapsed and the chief executive, Sam Bankman-Fried, gave no explanation.
Regulatory risk is another factor. The Securities and Exchange Commission (SEC) has had a significant impact on the market after suggesting that mainstream cryptos such as Ethereum (ETH -0.37%) should be classified as securities. Bitcoin, however, has never been subject to the same scrutiny. Most analysts agree that it is not subject to the same fear, uncertainty and doubt.
What to Look for in Bitcoin
If you are looking to invest in Bitcoin, there are some macroeconomic factors to consider. For instance, pay attention to the Federal Reserve’s monetary policy. Bitcoin was dragged down in 2022 when the economy slowed and inflation rose.
Additionally, more attention could be paid to the environmental impact of cryptocurrency mining. Bitcoin miners are increasingly moving to clean energy, but it is still very energy-inefficient. The White House released a report in late 2022 showing the adverse effects of proof of work cryptocurrencies on the environment and the energy grid. A ban on mining could have a significant impact on Bitcoin.
Overall, I’m very bullish on Bitcoin. It is my top crypto right now and could potentially have big gains in 2023.
Dominic Basulto currently has holdings in Bitcoin and Ethereum. The Motley Fool holds positions in and recommends Bitcoin, Coinbase Global, Ethereum and Goldman Sachs Group. The Motley Fool has a disclosure policy.
