Key Points
Going forward, it’s certain that money supply and federal debt will keep rising.
Bitcoin’s hard cap of 21 million units creates scarcity, which is its most compelling feature.
Volatility isn’t going anywhere, but the upside is significant.
- 10 stocks we like better than Bitcoin ›
Because Bitcoin (CRYPTO: BTC) is getting completely hammered right now, with its price 52% off its peak from last October (as of June 29), it's extremely easy for the market to be bearish and claim that the digital asset is dead. But if you're even remotely a student of history, then you know that it's best not to jump to any conclusions.
The world's most valuable cryptocurrency still has a promising future, in my opinion. Here's why Bitcoin could be the smartest buy of the decade.
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Fiat currency debasement supports Bitcoin's upside
Investors really only need to focus on one major tailwind when assessing Bitcoin's long-term potential. And that is ongoing currency debasement, a direct result of an increasing money supply. The U.S. M2 money supply, which generally measures physical cash and coins, as well as money in checking and savings accounts, has expanded 238% in the past 20 years. The growth was boosted by government stimulus during the 2008 financial crisis and the COVID-19 pandemic.
Looking over the next 10 years, there is virtually zero chance that the money supply will not keep expanding. Even during strong economic periods, the U.S. government operates with gargantuan budget deficits ($1.8 trillion in fiscal 2025) that require more borrowing.
The country's federal debt burden is approaching $40 trillion, a figure roughly 22% higher than total GDP. The spending is out of control, and there is no reason to believe it will ever be contained, given how politically unpopular budget cuts or tax increases are.
Bitcoin bulls say that since the supply of fiat currency has no limit, neither does Bitcoin's price. Because the leading cryptocurrency has a hard supply cap of 21 million units, it is viewed as a direct beneficiary of rising money supply. It makes sense that Bitcoin has skyrocketed almost 345,000% in the past 15 years.
It might be unwise not to own some
Just because governments will continue to spend recklessly and their central banks will keep funding this financial mismanagement, doesn't mean the constantly debased fiat currency will automatically flow to Bitcoin. There's not a direct connection.
However, individuals, corporations, financial institutions, and nations are slowly starting to understand the appeal of owning a digital, decentralized, and scarce asset that isn't controlled by a single entity. This is true despite the fact that Bitcoin will continue to experience volatility, as it has over the past several months.
If you're aware of the unsustainable fiscal path governments and central banks are on, though, then it's logical to allocate at least a small percentage of your portfolio to Bitcoin. It seems imprudent not to do so.
Should you buy stock in Bitcoin right now?
Before you buy stock in Bitcoin, consider this:
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
