Should I Buy Bitcoin Now? Wall Street's Data Feed Thinks So.
“Should I buy Bitcoin now?”
If you’ve been asking yourself this question, you aren’t alone:
The COVID-19 pandemic has lead to a global economic meltdown (along with a public health crisis). For example, the global stock market has lost trillions of US dollars worth of value. The price of oil even went negative.
With the world in complete chaos, and a third of the global population stuck at home, the anxiety in the air is palpable and people are looking for a Plan B.
Could that Plan B be Bitcoin? Bloomberg, a financial data and media powerhouse, seems to think so.
Should I Buy Bitcoin Now? Bloomberg Gives the Green Light
Finance professionals around the world rely on The Bloomberg Terminal, Bloomberg’s main product, for market data, trading, news, and more. Most large financial firms have Bloomberg Terminal subscriptions, which cost $20,000 a year per user. As of writing, there are 325,000 Bloomberg Terminal subscribers worldwide.
For a company like Bloomberg to put out a report saying that Bitcoin is getting ready for a “bull run” is huge. But… that’s exactly what they did:
In their Bitcoin report, Bloomberg states that Bitcoin is becoming digital gold, which makes sense considering that both gold and Bitcoin are scarce and not controlled by any single individual or group, such as a government.
Bloomberg also states that Bitcoin and gold “stand to be primary beneficiaries of the unprecedented monetary stimulus that’s accompanied by a mean-reverting stock market”.
In other words, Bloomberg believes that the combination of central banks around the world printing trillions of dollars in an attempt to reduce the economic fallout from coronavirus and stock prices going down will lead to Bitcoin and gold increasing in value.
Since both BTC and gold are scarce (e.g. there will only ever be 21 million BTC), investors might seek them out in the fear that trillions of dollars of newly printed government money will lead to inflation, or the reduction in purchasing power (value) of dollars, euros, and so on.
A declining stock market will also help push investors towards assets like Bitcoin and gold in search of better returns.
Will Bitcoin Repeat Gold’s Great Recession Bull Run?
During the early part of the Great Recession in 2007-2009, investors sold off gold (and other assets), as they fled to cash. After the collapse of the investment bank Lehman Brothers, which turned the US housing market crisis into an international banking crisis, nearly all assets nosedived in early 2008.
Sidenote: that situation was very similar to what happened in March 2020, as global markets plummeted once investors began to realize the scale of the coronavirus crisis and sought the safety of cash.
In late 2008 though, following its early 2008 selloff, gold began to reverse its course and staged a magnificent comeback. Investors flocked to gold, fearing massive inflation. This was due to the *then* unprecedented amount of money printing going on, as central banks around the world tried to stop the global financial system from collapsing. This scenario drove gold to all-time high prices in September 2011:
As the economy recovered, gold lost its appeal and the gold market began to move sideways as other markets like equities began to soar.
If you look at the chart above, you’ll see that early 2008 looks very similar to early 2020. Both periods resulted in gold and other assets experiencing massive selloffs in light of enormous global uncertainties (global financial crisis in 2008, coronavirus pandemic in 2020).
Will gold begin its rise again? And will Bitcoin follow?
During the global financial crisis and until October 2014, the central bank of the United States, the US Federal Reserve, printed $3.9 trillion. The first phase of money printing started 3 months after the collapse of Lehman Brothers. After that initial money printing response, it took another 6 months for other Fed programs to emerge.
Fast forward to the coronavirus recession, which is being called the Great Lockdown, and The Fed has printed $4 trillion barely 2 months into this new global economic crisis. In addition, The Fed has even said that they will engage in “unlimited quantitative easing” (fancy word for money printing), so you can expect that money printer to keep going BRRR:
Though many expected high, or even hyperinflation, from The Fed’s response to the recession, that didn’t end up happening. Much of the printed money used to buy up bad debt from banks was just hoarded by banks, which means that all that new money didn’t flood the system, causing inflation. This time might be different, though.
Due to the nature of this crisis, with much of the world sitting at home and economic activity at a standstill, governments will find it near impossible to collect any meaningful tax revenues.
Yet, they will still have to spend money to pay for things like unemployment benefits, health insurance, retirement benefits, military, transportation, and everything else that a country might spend money on. But with government debt at record levels, the only way many governments will be able to finance their spending is by printing lots of money.
In the absence of any way to stop the coronavirus, such as a vaccine, this mass money printing scenario might continue for a long time, leading 1 or more countries to fall victim to high, or even hyperinflation.
Of course, in such a scenario, we can expect individuals to flock to assets like gold, which has served as a store of wealth during bouts of hyperinflation and otherwise tumultuous times. For example, during the Vietnam War, gold literally served as a “passport” for families trying to flee war-torn Vietnam, as escape boats took gold in exchange for passenger seats.
Will individuals also flee to Bitcoin?
According to Bloomberg, it’s possible. The report mentioned earlier in this article states:
Bitcoin's correlation to gold has increased to all-time highs. Unprecedented quantitative easing supports the quasicurrencies [of gold and Bitcoin].
Our graphic depicts the 52-week correlation of Bitcoin to gold jumping to the highest in our database since 2010. Despite spikes in most betas to stocks', Bitcoin's relationship with gold is about twice that of equities. Bitcoin's maturation process from speculative appreciation toward a store-of-value mechanism akin to gold should continue.
If Bitcoin’s correlation to gold (a safe haven asset in times of crisis) is increasing, we can expect investors to seek out both Bitcoin and gold as the global situation worsens, which it will, unfortunately.
The International Monetary Fund (IMF) has said that the Great Lockdown will be much worse than the Great Recession and rivaled by only the Great Depression of the 1930s, which at its peak saw unemployment rise to as much as 33% (1 in 3 working-age people) in some countries.
Bitcoin was born in a financial crisis, it will come of age in this one.
Another thing to mention is that Bitcoin had its 3rd halving event, when the rate at which new Bitcoin is created gets cut in half. Historically, halvings have led to huge increases in BTC’s price in 2013 and 2017. This event, combined with the current economic backdrop, might serve as a potent catalyst for an epic Bitcoin bull run.
Bitcoin Investment Strategy (How to Buy Bitcoin)
So now you might be thinking, “Maybe I should buy Bitcoin… but how should I buy Bitcoin right now?”
While there are many ways to invest in Bitcoin, the easiest way is to just buy and hold in a Bitcoin wallet.
(You can buy Bitcoin using various services that allow you to buy Bitcoin using dollars, euros, etc. like Cash App, Coinbase, and Kraken)
There’s no need to look at charts and be some sort of financial wizard since if at any point in Bitcoin’s history, you held your BTC for 3.25 years, you made money.
Minimum Bitcoin Investment
While many traditional financial institutions require high minimum deposits to get started investing in stocks and other types of assets, Bitcoin is different. While some venues for buying Bitcoin do have relatively high minimum investments, this isn’t always the case.
Check with your preferred Bitcoin provider, but minimums are usually much smaller than those for other kinds of assets.
Where to Store Your Bitcoin
Once you have your Bitcoin, you don't want to keep it with a centralized exchange (where most people buy their BTC).
This is because centralized exchanges are known for getting hacked. Over the years, investors have lost billions of dollars due to exchanges mismanaging users' funds.
Instead, you want to keep your BTC in a wallet where you control your private keys.
(As a sidenote, owning your own assets and not entrusting them to an exchange, bank, or other financial institution is one of the main benefits of Bitcoin and other cryptocurrencies)
While there are many wallets that give you control of your money, Exodus is a user favorite thanks to the following features:
- Supporting over 100 crypto assets
- Focusing on premium design and ease of use
- Being the only wallet to support desktop, mobile, and hardware wallet (Trezor) integration
- Allowing you to exchange your Bitcoin for other cryptos right from your wallet - without creating an account!
- Giving you the ability to sync your wallet between desktop and mobile
- Having 24/7, fast human support if you ever need help
If you want to research other wallets as well, our friends at Cryptoradar put together an excellent list of well-regarded wallets that should help with your research.
Want to know the current Bitcoin price before jumping in? Check our crypto charts for the latest price!
Since the Bitcoin industry moves at such a fast pace, it’s good to keep up with industry news, since things can look very different from one day to the next. Our dedicated BTC wallet page lists the latest Bitcoin news for you to read at the bottom of the page.
So going back to the question from the beginning of the article:
“Should I buy Bitcoin now?”
Has your answer to that question changed? Bloomberg’s certainly has!
All jokes aside, Bitcoin’s growth has been astounding to watch, and the significance of Bitcoin’s recent acknowledgement by a company like Bloomberg, which quite literally acts as Wall Street’s data feed, cannot be understated.
In a world of uncertainty where central banks are printing infinite amounts of fiat money, Bitcoin provides 100% certainty:
There will only ever be 21 million BTC.
Information provided is for informational purposes only and should not be considered financial advice. Investing in crypto assets is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Past performance is not indicative of future results.