update 19 November 2021

Is Holding Cryptocurrency A Good Long-Term Strategy?

For most of their history, cryptocurrencies have been viewed by the mainstream as glorified gambling tools. In 2017, multi-millionaire life coach Tony Robbins said that buying Bitcoin was like “going to Vegas”. Innumerable others, including Warren Buffet and Peter Schiff, have criticized the asset class as lacking any ‘intrinsic value’.

Despite years of ridicule along these lines, it appears that the nearly $3 trillion asset class is here to stay. Therefore, cryptocurrencies may provide more opportunities for profit besides serving as speculative vehicles. So, instead, should we consider holding crypto as part of a long-term investment strategy?

This article will outline two reasons why holding Bitcoin and digital assets may be an excellent long-term plan.

Bitcoin As An Inflation Hedge

One of the premier crypto developments of this year has been the influx of wealthy institutional money into Bitcoin. While some organizations are adding the asset to their balance sheet, others are accepting it as payment. Take it from Elon Musk, the world’s richest man, whose company invested $1.5 billion in cryptocurrency this year.

Why the sudden interest? The answer is that institutions increasingly recognize Bitcoin as a legitimate store of value. This use case is precious in 2021, as government spending has sent yearly inflation to a thirty-year high.

Bitcoiners have long promoted Bitcoin as an answer to irresponsible money printing by central banks around the world. That’s because its supply is programmable, capped at 21 million coins. Hence, Bitcoin should appreciate against fiat money over time, all other things being equal.

Investors are increasingly labelling Bitcoin as “digital gold” due to this property. In fact, according to JP Morgan, institutions have been shifting their balance sheets out of gold and into Bitcoin. However, gold has failed to appreciate despite its history and reputation even in today’s massively inflationary environment. Meanwhile, a recent Bloomberg analysis has concluded that Bitcoin may be “the best inflation hedge around”, citing 99% deflation since its inception.

Michael Saylor on Bitcoin

Billionaire CEO of Microstrategy, Michael Saylor, has $1 billion invested in Bitcoin. Meanwhile, his company owns over 100 000 bitcoin – worth over $7 billion today. He believes that Bitcoin will entirely replace gold one day and even calls it “the apex property of the human race”.

“We think that holding Bitcoin for the long term is the highest upside, lowest risk strategy we can pursue,” Saylor told Bloomberg in July. “We think that every investor, every company, and every government on Earth can benefit from Bitcoin.”

Some of the most devoted Bitcoiners even believe that Bitcoin will become the currency of the world. If that future exists, gathering as much as one can right now be the financial decision of a lifetime.

Cryptocurrency As Financial Technology

Some may find the concept of Bitcoin as a global currency a little far fetched. In that case, one can still think of a Bitcoin or crypto investment as an investment in financial technology.

Digitized, programmable money comes with numerous advantages that traditional finance cannot match. The foremost is decentralized finance (Defi) – a blockchain-based financial service unreliant on central banking. Defi operates using programmable intelligent contracts, which automatically execute transactions when specific conditions are met.

Because these services operate peer-to-peer, they ignore inefficiencies involved with intermediary fees and processing time. That means blockchain networks – and the apps built on top of them – may compete with and replace many centrally controlled services in the long term.

Ethereum is currently the king of decentralized finance, as Bitcoin has always been more difficult to develop such services for. Its ICO in 2015 drew significant attention for its potential on this front. Having started at just $0.67, the network has rapidly grown so that each Ether is now worth about $4000. Thanks to its properties and growth, Ethereum is the only blockchain network people believe could compete with Bitcoin.

Raoul Pal on Crypto

CEO of Global Macro Investor, Raoul Pal, is exceptionally bullish on cryptocurrency’s long term potential for this reason. He currently has 100% of his liquid net worth invested in the space.

“If we look at the other major asset classes around the world, they rage between $150 and 350 trillion US dollars. These digital assets will get to a $200 trillion asset class by 2030,” said Pal in an interview. “This is an entire asset class going up one-hundred fold by the end of this decade”.

That doesn’t leave Bitcoin out of the picture here. However, a significant upgrade this week has made the Bitcoin blockchain more compatible with smart contracts. So, this made it even more open to DeFi. Furthermore, Bitcoin sidechains are already developing some feature-rich Defi protocols, such as SOVRYN.

Either way, investing in one of the top two cryptocurrencies may be an investment in the future of finance. The full potential of DeFi is far from failure. So, investing now could lead to significant returns in the future.


price change

Crypto is more of a significant long-term investment than a speculative vehicle. Holding cryptocurrency is not only an excellent hedge against inflation but also a belief in its power to revolutionize finance.

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