Bitcoin (CRYPTO: BTC) is priced at about $68,000 (as of March 6), a far cry from its all-time high of $126,000 in October. Five consecutive down months have obliterated market sentiment about the coin, and exchange-traded fund (ETF) outflows have compounded the selling.
But buying assets that almost nobody wants is often when they’re the cheapest relative to what they’re actually worth. Rumors of Bitcoin’s demise have been very much exaggerated. And that means if you’re looking to allocate $1,000 into crypto right now, you should probably be buying Bitcoin — here’s why.
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Over the long term, this coin’s price is almost certainly going to be higher than it is today, and it’s all thanks to its scarcity.
Nothing about its crash from all-time highs changes the fact that there can only ever be a maximum of 21 million Bitcoin in existence. A little more than 95% of that sum has already been mined, and only about 450 new coins enter circulation daily. Today, an estimated 3 to 4 million of the roughly 20 million existing coins are permanently lost.
This means that with even a little bit of consistent demand, the asset will experience strong price pressure, because its supply growth decreases over time.
On that front, major holders are accumulating. U.S. spot Bitcoin ETFs hold about 1.2 million bitcoins. The Bitcoin treasury company Strategy, formerly known as MicroStrategy, holds more than 720,000 coins after its most recent purchases reported in early March, and many other public companies own it. And among sovereign nations, the top 10 Bitcoin holders control about 2.5% of its supply outstanding.
None of those big holders are the type that’s likely to sell in a panic. They will likely be holding it for the long term. That helps to ensure that future buyers will pay higher prices than those today.
There’s another factor that makes now a great time to buy $1,000 of Bitcoin. It’s currently trading at or below what it costs most miners to produce it.
By some measures, the average production cost of one bitcoin is $77,000, but a handful of other estimates put the cost a bit higher, with some suggesting all-in production costs as high as $167,800 per coin. Historically, such periods where Bitcoin trades below production cost have been short-lived, and its price has risen expeditiously to close the gap.