Zacks Investment Ideas Feature Highlights: Bitcoin

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Chicago, IL – March 10, 2022 – Today’s Zacks Investment Ideas feature spotlights Bitcoin (BTC).

Why Regulation is a Bullish Signal for Bitcoin

The fallibility of humanity has been thrust into the forefront of financial markets lately, with economists believing the Federal Reserve has let inflation rise too high for too long, geopolitical uncertainty peaking as Putin invades a former ally on its western border. At the same time, Europe is going through an energy crisis which many fear could lead to another recession or, even worse, to years of stagflation (low or no growth, high inflation) if this situation is not quickly attenuated.

Bitcoin and its decentralized blockchain nature make it a perfect alternative to fallible fiat currencies, as it greatly reduces vulnerability to human error and enables the free market environment that economists have theorized for centuries.

Bitcoin rallies ahead of President Biden’s planned executive order focused on monitoring the booming cryptocurrency market. Recent concerns over Russia’s use of bitcoin have propelled this prominent digital asset to the forefront of the Biden regime’s regulatory probe.

This is one of those rare times when government regulation is actually a bullish signal for a financial asset. Crypto regulations would further legitimize this opaque asset class and likely open the door for institutional investors to further explore this space and even potentially invest directly in these blockchain-backed coins for their client portfolios.

The Russian-Ukrainian conflict accelerates adaptation

Bitcoinheld strong amid the market driving the Russian invasion of Ukraine as investors consider the long-term fit of a decentralized digital reserve currency. Bitcoin’s upside potential following the blatant -64% devaluation of the Russian ruble (fiat currency) following justified Western sanctions.

Cryptocurrencies are the most illuminating winners of the Russian-Ukrainian conflict, as their rally shines a light on the shortcomings of the world’s 180 distinct fiat currencies. The idea that the currency of a global superpower like the Russian ruble could lose more than -50% of its value in a week just because other governments decided to impose sanctions on the country is a scary thought (even if these sanctions are more than justified).

Is This the Beginning of the End for Fiat Currencies

Fiat currencies are the 180 separate global monetary systems controlled/regulated by their respective central banks, which immediately leaves this government-backed money vulnerable to human error (which happens far more frequently than many realize).

The value of fiat currencies derives from nothing but the trust of our government and the acceptance of its value by professionals in the global market, as there have been no real alternative options until now. .

Cryptocurrencies are disrupting the global financial system, and Biden’s impending executive order to “regulate” them only further legitimizes the use of these digital assets by deep-pocketed money managers and global institutions.

Bitcoin is up more than 20% since Russia officially invaded Ukraine as investors wrestle with the hard truth that fiat currencies are much less secure than we think and money under your mattress will only lose value over time (and at an accelerating rate these days).

Final Thoughts

Cryptocurrencies will be part of our new economy, whether you like it or not, and it would be prudent to invest today before their massive adaptation. I would recommend a small portfolio allocation to this highly volatile asset and consider diversifying your crypto exposure with Ethereum and Solana (GROUND).

Both coins offer advanced applications beyond a simple store of value or medium of exchange such as smart contracts (automated contracts that execute financial transactions once/if specified stipulations are met. ETH has first-mover advantage (which means a lot given its wider/longer-standing acceptance), while SOL is a much more functional open-source blockchain coin (30 times faster with 1,000 transaction costs times cheaper).

However, Ethereum 2.0 which will be released this year should close these gaps in advantages that SOL has over it and create a much safer processing ecosystem for its users.

Good negotiation!

Dan Laboe

Equity Strategist and Portfolio Manager Headline Trader @ Zacks Investment Research

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