Will Bitcoin Ever Recover?

Bitcoin could rebound, and investors need to keep an eye on Banxa Holdings Inc. (TSXV:BNXA).

| More on:

Bitcoin has erased all of its gains since the start of 2021. At the time of writing, BTC is trading at US$34,800, just 5% higher than its price on January 1. By the time you finish reading this article, that 5% could be gone (you know how volatile it is). 

Is this a temporary bump in Bitcoin’s path to world domination or a severe setback that it will never recover from? Here’s a closer look. 

Why is Bitcoin dropping?

Bitcoin rose to an all-time high when it seemed almost unstoppable. However, some recent events have cast doubt on its appeal as an investment asset. 

For one, investors are now worried about the environmental impact of Bitcoin mining. The server farms across the world that generate new BTC and secure the network consume nearly as much energy as Argentina. That’s untenable for corporations and investors who want to have a positive impact through their investments. 

Meanwhile, China renewed its crackdown on the sector, describing it as a “systemic financial risk.” Bitcoin mining has been banned in several Chinese provinces, and the government has asked financial institutions to refrain from handling crypto transactions. 

These issues have made investors wary of the asset class and could be the reason it’s now worth half as much as its all-time high. However, these issues are also likely to resolve themselves. 

The future

China’s ban creates a virtuous cycle for the industry. It’s important to know that the majority of BTC mining is currently conducted in China. Miners in the country account for 70% of mining activity. 

Now that the government has trampled their business, many are expected to migrate to other parts of the world. These migrant miners are likely to arrive in places where the energy is cheapest and cleanest. Iceland, Canada, and Sweden have already emerged as prime destinations, because of their renewable energy sources and cooler climates that facilitate mining. 

That means BTC mining is about to become significantly greener in the years ahead. 

Sovereign adoption

China’s skepticism about cryptocurrencies isn’t new. In fact, the country cracked down on BTC in 2013 and 2017, too. China may never adopt BTC willingly, but smaller nations with vulnerable economies are already moving forward to embrace the technology. 

El Salvador became the first country to make Bitcoin legal tender. Panama and Paraguay have also introduced legislation to do the same soon. Growing adoption should bolster Bitcoin’s appeal as an asset class in the future. 

The best way to bet on this trend is via a gatekeeper: Banxa Holdings (TSXV:BNXA). Banxa is the payment processor for major cryptocurrency companies such as Binance, Ledger and Abra. It allows these enterprises to convert their users’ fiat currencies into crypto. 

Banxa stock is currently trading at $3.3, 56% lower than its all-time high. If Bitcoin’s price and adoption rebounds, the stock could see a major upswing. If you’re looking for an underrated proxy to bet on Bitcoin’s eventual rebound, this is one of the best opportunities on the market right now. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vishesh Raisinghani owns shares of Banxa Holdings. 

More on Tech Stocks

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »

A worker uses a double monitor computer screen in an office.
Tech Stocks

4 Reasons to Buy Kinaxis Stock Like There’s No Tomorrow

Kinaxis stock has a strong past. But there is even more to look forward to from this top tech stock.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

The Future of AI: Best Canadian Stocks to Buy Now

Here are two of the best AI-focused stocks in Canada that you can consider adding to your portfolio before it’s…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

2 TFSA Stocks to Buy Right Now With $7,000

Are you looking for growth stocks that can help you maximize the tax-free withdrawals of the TFSA? This article is…

Read more »

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy Right Now for Less Than $1,000

Not all tech stocks are the risky investments that many think they are. Which is why we're focusing on the…

Read more »