The finance world didn't blink when Bitcoin (BTC 2.64%) made its debut in 2009. Each coin was essentially worthless, and its price didn't break the $1 barrier until 2011. Even then, few people saw Bitcoin for what it was: a spark that would ignite a multi-trillion industry.
Today, the crypto market is worth nearly $2.2 trillion, representing 1,000% growth in the last two years alone. Industry-wide gains of that magnitude are utterly unheard of, but the crypto market is still worth a fraction of the global equity market, which is valued at $125 trillion. In other words, if cryptocurrency is the disruptive force that many now believe it to be, there is still plenty of money to be made. And Bitcoin looks like a smart investment.
Here's why.
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A durable competitive edge
Bitcoin was the first widely adopted cryptocurrency. It was built on blockchain technology, a distributed record-keeping system that tracks transaction data and prevents fraud without the help of traditional financial institutions. That makes Bitcoin a sort of digital cash, meaning consumers can use it to transact directly with merchants, eliminating the need for banks and credit cards.
More importantly, Bitcoin is a finite asset. Its source code limits its supply to 21 million tokens. And because its supply is capped, its purchasing power should theoretically increase over time, meaning Bitcoin is deflationary in nature. In fact, a recent article in Bloomberg suggests that while the U.S. consumer price index has risen 28% over the past decade, Bitcoin's value has deflated by 99.996%. Put another way, while the U.S. dollar is worth less than it was 10 years ago, Bitcoin is much more valuable today.
Bitcoin's first-mover's status and finite supply have made it by the most popular cryptocurrency by a wide margin. In fact, with a current market cap of $885 billion, Bitcoin accounts for 41% of the value of the entire crypto market. Better yet, investors have good reason to believe demand will continue to rise, which should push its price higher.
A multi-trillion dollar catalyst
Retail traders were early adopters of crypto, but the market is now large enough to support institutional adoption. In fact, a recent survey from Fidelity suggests that 52% of institutional investors already own digital assets, but nearly 90% find digital assets appealing. Additionally, 37% of that cohort already owns Bitcoin -- either in their own portfolio or a client's portfolio -- making it the most popular crypto asset among institutions.
More importantly, 71% of those surveyed plan to buy digital assets in the future, indicating that crypto adoption is on the rise. That bodes well for the industry as a whole, and especially for popular assets like Bitcoin. Institutional investors currently have over $100 trillion in assets under management, according to Bloomberg, and a small fraction of that total could supercharge the crypto market. For instance, Ark Invest CEO Cathie Wood believes that if institutional investors allocated just 5% of their funds toward Bitcoin, its price would reach $500,000 per coin. Better yet, Wood believes that could happen by 2026. If that scenario does indeed play out, it would mean more than tenfold gains for investors (based on a current price of $47,000 per coin).
Even if that doesn't come to pass, Bitcoin still has a durable competitive edge, and institutional adoption should still catalyze significant price appreciation. That's why this cryptocurrency looks like a smart long-term investment.
