Will bitcoin be a good investment in 2016?

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Bitcoin has witnessed an exponential growth in recent months and has started gaining attention among the media and government authorities. Several multinational corporations and financial institutions have started embracing bitcoin as a legitimate payment system. Bitcoin is the most popular digital currency holding around 80% of the market share and its market cap is worth more than $10 billion currently. Bitcoin offers faster transactions with anonymity and reduced costs, making it an attractive choice for online traders. Some of the key reasons to consider Bitcoin as a good investment for 2016 are listed below,

Increased Acceptance:

Bitcoin is gaining popularity as more and more investors have started showing interest in this borderless digital currency. Based on certain financial reports, there has been around 44 percent increase in the number of businesses which has started accepting Bitcoin payments including major brands like PayPal, Barclays and Visa. Also Bitcoin startups have received more than $1billion in overall funding from several venture capitalists around the world. All this support from investors is considered a sign of acceptance, which has definitely resulted in a positive impact on Bitcoin’s market price. Some notable personalities like George Osborne, the UK chancellor and Larry Summers, former secretary of US treasury have expressed their approval for Bitcoin. Even the US presidential candidate of the Republican Party, Rand Paul has accepted bitcoin donations for his campaign. The year 2016 has definitely been a remarkable year for Bitcoin whose market price is expected to reach around $650 by end of this year.

Volatility and Limited Supply:

The important question which arises among the minds of investors is the volatility of bitcoins as witnessed by past market trends. It has dropped to as low as $100 in Sep 2013 and suddenly moved to its peak price of $1,240 in Dec 2013. The answer lies in the fact that market price of Bitcoin is not backed by any assets or controlled by any centralized authority. Its price varies purely based on the principle of supply and demand similar to commodities like Oil and Gold. You can use bitcoins volatility to your advantage by trading binary options against it. If you can speculate the price movement of Bitcoin by analyzing the market trends, you can make money easily by trading binary options with Bitcoin as underlying asset.

Bitcoins are created using the mining process by solving complex algorithms and their supply is very limited, similar to the resources like Gold and silver. The rate at which Bitcoins are created is very slow and the production will be capped once the target of 21 million is reached.  Considering its limited supply and predictable growth rate, Bitcoin can definitely be considered as a good investment in the long-term compared to flat currencies.

Long-term growth prospects:

Though Bitcoin might not yield any significant margins in the short-term, it will definitely be a worthy investment in the long-term. With more and more businesses starting to accept Bitcoin payments, you can expect lot more transactions to happen in upcoming events like Christmas shopping and Black Friday sales. The possible increase in transaction volume is estimated to cause 12% rise in Bitcoin price. This increase in price will further boost the spending among people as more merchants start accepting bitcoin payments. The long-term investors can expect Bitcoin to reach the market price as high as $1000 in the next 2-3 years. The U.S. Commodity Futures Trading Commission (CFTC) has classified Bitcoin as a commodity which has brought some new regulations to it. This has put a check on the unregistered firms that were trading based on the derivatives of Bitcoins. Demographic of Bitcoin usage has witnessed 27% rise in every quarter among the age groups of 16-24, which is really a positive sign for investors.

Open-source and Easy Access to Anyone:

Bitcoin is available as an open-source system and anybody with access to Internet can start investing in it. You can open your bitcoin wallet in less than 5 minutes and track your payments easily. It is also easy to open a trading account with Bitcoin exchanges like Bitfinex, Bitstamp, Coinbase etc. through which you can start trading Bitcoins in exchange of physical currencies like USD or Euro. All the Bitcoin transactions are recorded in a distributed ledger called “Blockchain” and it can’t be lost like money. Bitcoin transactions are completely anonymous and won’t compromise your financial privacy.

While 2015 was a relatively calm year for Bitcoin, 2016 will be much more exciting since the block halving is about to come in 9th July 2016 after which the amount of bitcoins rewarded to the miners will be reduced by 50%.  Because of this reduced supply, we can anticipate some increase in market price of Bitcoins during second half of 2016. One of the best reasons to explore investment opportunities with Bitcoin is its innovative and revolutionary nature doubled with promising growth in long-term. Before making an investment with Bitcoin, you should keep yourself updated on the market trends and do some research about the costs. Since Bitcoin is now being considered as a taxable asset by the IRS, you should also plan your investments after evaluating the capital gains tax that might be imposed.

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