Shiba Inu (SHIB -0.12%) investors have been hit with big losses over the last six months. While the meme token is still up 45,000,000% since hitting a low in November 2020, it has fallen 70% from its high in October 2021. Despite that setback, Shiba Inu still boasts over a million holders, and many investors are hoping that burn projects and other catalysts can reenergize its price.
While anything is possible, the meme token currently lacks a competitive edge, and burning some of the tokens to make the remaining tokens more valuable is not an indefinite solution or a good investment thesis. For that reason, I think crypto investors should consider other assets.
Bitcoin (BTC -0.26%) is a great place to start. Here's why.
The investment thesis
The bull case for Bitcoin is straightforward: It was the first widely adopted cryptocurrency, and it remains the most popular by a wide margin. In fact, with a market cap of $765 billion, Bitcoin accounts for 41% of the value of all cryptocurrencies. Additionally, Bitcoin is limited to 21 million tokens, and any economics textbook will tell you that scarcity makes an asset valuable. More to the point, when demand for a scarce asset rises, the price of that asset will rise as well.
So how high could Bitcoin's price go? That depends entirely on demand. But Ark Invest believes Bitcoin will achieve a market cap of $28.5 trillion by 2030. If that happens, each individual Bitcoin would be worth about $1.36 million, implying 33-fold gains from its current price of $41,000.
A $1 million price target
In a detailed report, Ark explains the driving forces behind that $1 million price target. Specifically, by 2030, the firm believes Bitcoin will represent 5% of the balance sheet cash of S&P 500 companies, 2.5% of institutional assets, and 1% of total nation-state reserves. While those specific numbers are subject to guesswork, the underlying trends are already in progress.
A recent study from Fidelity suggests that 71% of institutional investors plan to diversify into crypto in the future, up from 59% last year. Better yet, 37% already own Bitcoin, making it the most popular cryptocurrency among institutions. Similarly, Tesla and MicroStrategy have billions of dollars in Bitcoin on their balance sheets, and a handful of countries have already invested in Bitcoin too.
However, those aren't the only catalysts at work. By 2030, Ark believes that high-net-worth individuals and other retail traders will invest nearly $10 trillion in Bitcoin, and that more emerging markets will adopt Bitcoin as a currency, allowing it to take market share in global settlement and remittance volumes. Again, a lot of guesswork goes into the specific figures, but the underlying trends are already in progress.
A growing number of fintech companies offer digital wallets with support for Bitcoin trading, including PayPal, Block, and MercadoLibre. Additionally, several crypto exchanges offer debit cards that allow investors to spend cryptocurrency in stores and online. The Visa-backed Coinbase card is a great example. Collectively, those tools make it easy for people to invest in (and fund purchases with) Bitcoin. In turn, Bitcoin settlement volume totaled $13.1 trillion in 2021, surpassing the $10.9 trillion in payment volume powered by Visa, the world's largest payments network.
The big picture
There is always some level of risk when investing money in any asset, and that's especially true with cryptocurrencies. The crypto market has been very volatile since its inception, and it has fallen by more than 50% on several occasions in the last few years.
However, Bitcoin is probably the safest cryptocurrency out there. Its first-mover's status and tremendous popularity give it an edge over other digital assets. And Ark Invest has laid out a compelling case for why demand will rise in the future. From that perspective, Bitcoin looks like a smart long-term investment for any risk-tolerant investor.