Since July 2010 (the earliest data available from coinmarketcap.com), Bitcoin has produced a ridiculous return of nearly 43,000,000%. That crushes the gains of both the S&P 500 and Nasdaq Composite Index by insanely wide margins. And it has no doubt made some early adopters extremely wealthy.
Even though Bitcoin has been around for about 14 years, I don't think it's too late to get in on the action. Right now, the price is 61% off its all-time high from November 2021, so there is some heightened pessimism around this top cryptocurrency. But can buying now help you become a millionaire?
Given enough time, I believe the answer is a resounding "yes."
Image source: Getty Images.
There is a clear need for Bitcoin
It's important to first take a step back and understand why Bitcoin is even needed in the world. Think about citizens dealing with corrupt governments (like Mexico's), or currencies that experience hyperinflation (like in Venezuela), or countries ravaged by war (like Afghanistan). The people in these places can't rely on the current financial systems that are in place. A decentralized form of money that can't be confiscated, that isn't controlled by anyone, and that can be stored on the internet or devices that connect to the web is extremely valuable in these types of situations.
In the U.S., skeptics would make the argument that there is no need for Bitcoin because we have a robust payments industry and developed capital markets. This misses the point that Bitcoin is a global network. Moreover, we take our working financial infrastructure for granted, while people in other countries struggle with a lack of basic banking services or stable currency.
Plus, Bitcoin does serve a need in the U.S. Some investors and institutions are keen on holding a portion of their wealth in the world's most valuable cryptocurrency. That's because Bitcoin has a fixed supply cap of 21 million, yet over the past decade, central banks around the world have pumped so much money into the economy to stimulate growth after the Great Recession and throughout the coronavirus pandemic. The more fiat money, or government-backed currency, that there is relative to Bitcoin, the better the prospects for the latter's price appreciation.
The staggering debt burden of the U.S., which will only be exacerbated by further increases of the national debt ceiling in the future, also tells me that we can't keep interest rates high for too long. This increases the odds of elevated levels of inflation for extended periods of time. Holding Bitcoin makes even more sense with this in mind.
Running the numbers
Bitcoin has a market cap of about $516 billion. But let's say that a decade from now, its entire value equals that of the total value of all the world's gold, or roughly $12.5 trillion. I don't think this scenario is out of the question. As more individuals, corporations, and governments learn about Bitcoin and its attractive properties, it's probable that they would at least store a small fraction of their investable assets or reserves in it.
This would mean that Bitcoin's price would rise about 25-fold between now and the summer of 2033. This performance would likely crush what investors could earn putting their money in the stock market (or any asset class, for that matter). This projection suggests that a $40,000 investment in Bitcoin today could make someone a millionaire in 10 years' time.
To be clear, there are a ton of risks to think about. The most pressing one is the threat of governments banning Bitcoin and other cryptocurrencies, making it illegal to buy and own these digital assets. That's something to always keep in mind. Additionally, Bitcoin simply might not be adopted as widely as many hope.
Bitcoin could reach that projected value in a much longer time frame, or maybe not at all. The range of outcomes is vast.
Nonetheless, the potential is certainly there for Bitcoin to make you a millionaire.
