Let's get one thing straight: some of the wealthiest billionaires in the world really, really do not like crypto. On financial TV news shows, they warn of the risks posed by crypto. At investor conferences, they downplay the significance of crypto as an asset class. And there is one crypto that they have advised people not to buy time and time again, and that's Bitcoin (BTC +0.52%).
Frankly, that's a bit surprising. These are the same investors who scour the world for the best investment opportunities. These are the same investors who invest in high-risk asset classes such as private equity, real estate and emerging market stocks. And these are the same investors who have mastered the trade-off between risk and reward. So what is keeping them from buying Bitcoin?
Market performance and future growth prospects
Over the long run, Bitcoin has the potential to outperform every single other asset class. At one point in 2021, Bitcoin was the best-performing asset of the entire decade, returning ten times more than the NASDAQ 100. At that time, Bitcoin was posting annualized returns of 230% per year, far outpacing the 20% annualized returns of the world's top tech stocks. Granted, that was back when Bitcoin was trading near $60,000, but it gives you an idea of just how much potential Bitcoin has as a high-risk, high-reward asset class.
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Crypto investing is all about finding that 10x or 100x investment, and that might be one reason many billionaires still do not trust Bitcoin yet. It just seems too good to be true. In fact, in one recent interview, billionaire investor Bill Gates suggested that cryptos were "100% based on greater fool theory." In other words, the only reason you would buy Bitcoin is because you can find a less informed investor to sell it to at a higher price. Based on this line of thinking, enthusiasm for cryptos is a form of mania, much like the Dutch tulip mania of the 1600s.
At some point, the thinking goes, the price of Bitcoin is going to come crashing back to earth. And, arguably, this is exactly what has happened in 2022, with Bitcoin crashing back down to the $20,000 support level. But even with this dire course of events, Bitcoin is still up a resounding 18,531.54% over its entire existence. And many of the sharpest minds in the investment world say that we have a lot higher to go, based on Bitcoin's ability to rebound from every dip. Some have even placed a $1 million price target on Bitcoin.
Bitcoin goes mainstream
Moreover, it's increasingly the case that institutional investors are getting into the Bitcoin game. Consider the recent partnership deal between BlackRock (BLK +0.00%) and Coinbase Global (COIN 1.31%), in which the world's largest asset manager linked up with one of the world's largest cryptocurrency exchanges to offer crypto trading services for big institutional clients like pension funds and endowments. This means that some of the most reputable names in the investment world are now going to be dipping their toes into the crypto pool. And the one crypto that they are focused on, first and foremost, is Bitcoin.
CRYPTO: BTC
Key Data Points
In addition, some of the biggest banks on Wall Street, including the likes of JPMorgan and Goldman Sachs, are now starting to offer crypto-related trading and custodial services for their biggest institutional clients. One big breakthrough came in 2021, when Wall Street banks started seriously discussing crypto as a new asset class. Every asset class has its own unique risk-reward profile, and Bitcoin has more to offer than simply crazy-high rates of return. Some have argued, for example, that Bitcoin could be a hedge against inflation or help to reduce the overall risk profile of a larger portfolio. Whether these claims turn out to be true, of course, remain to be seen.
Will top billionaires ever change their mind on Bitcoin?
Billionaire Warren Buffett recently remarked that he wouldn't buy all of the Bitcoin in the world for $25. According to Buffett, Bitcoin doesn't produce anything and has no inherent value. Given that Bitcoin currently has a market capitalization of approximately $380 billion, this boggles the brain. It means that the crypto market would have to be one of the most inefficient markets in the world. How else could Mr. Market possibly show up every day and offer a price of $20,000 for something that was worthless?
I'm convinced that the world's top billionaires will change their views of Bitcoin sooner rather than later. As big institutional investors begin buying Bitcoin for their portfolios, it will become harder and harder for the world's billionaires to remain on the sidelines.
