During the past decade, the S&P 500 and the Nasdaq Composite Index have returned 231% and 335%, respectively, including dividends (as of April 15). This shows that it has been a fantastic time to be a stock market investor.
However, Bitcoin (BTC +1.46%) has absolutely crushed those gains. If you invested $1,000 in the world's oldest and most valuable cryptocurrency in April 2013, you'd be sitting on a balance of roughly $121,000 right now. That monster 12,000% gain is truly jaw-dropping.
There might be no other asset that has performed better than Bitcoin has during the past 10 years. It's been an impressive journey for this top digital asset. Before we assess where it can go in the future, it's important to understand Bitcoin's history.
Bitcoin's past
What was once considered some fake form of internet money that only computer scientists were interested in and aware of has blossomed into a global asset with a market cap of $1.2 trillion. That valuation would make Bitcoin the world's eighth-largest company.
What I find most noteworthy about Bitcoin is that it continues to stand the test of time. There have been numerous instances in the past where its price experienced declines of 50% or more. Critics haven't hesitated to call it a fad that will eventually see its value go to zero. The broader crypto industry has had its own set of issues. And yet Bitcoin has continued marching higher.
An asset that remains relevant over a decade is one thing that caught the attention of investors. But I think education might be the key factor that has propelled Bitcoin. More and more people are learning about its decentralized properties, as well as its fixed-supply cap. These are attractive characteristics for a financial asset to have.
Bitcoin's monumental price rise has paved the way for a budding ecosystem of financial services that support it and make it easier to use. Earlier this year, the Securities and Exchange Commission (SEC) approved spot exchange-traded funds (ETFs) that have opened the capital floodgates. Bitcoin's price has soared 56% just this year (as of April 15), indicating the heightened interest in these regulated financial products and a stamp of approval that Bitcoin has arrived.
CRYPTO: BTC
Key Data Points
Bitcoin's future
I think it would be silly to expect that during the next 10 years, Bitcoin's price could soar another 12,000%. If this happened, the crypto would be valued at close to $150 trillion. Given that global gross domestic product totaled just over $100 trillion last year, that astronomical sum seems highly unlikely based purely on the math.
That doesn't mean this is a bad investment opportunity, though. Even as Bitcoin hovers close to its all-time highs, I still believe investors should consider adding it to their portfolios if they haven't already. The best approach, in my opinion, is to dollar-cost average a small sum of capital into Bitcoin over time. That way you can take advantage of different price points, eliminating the need to correctly time the market.
Bitcoin's fixed-supply cap is perhaps its most compelling trait. There will only ever be 21 million coins in circulation (about 19.7 now circulate). And after this month's halving, Bitcoin's supply growth rate will be lower than gold's.
This attractive property matters in a world where inflation continues to eat away at the purchasing power of fiat currencies. Bitcoin is a hedge that people can use to store their wealth. Its track record over the past decade proves that it has done a wonderful job at raising one's purchasing power.
Bitcoin is likely to continue doing well in the future, but its future returns won't come close to resembling the past. I still believe it has a good shot at outperforming the S&P 500 and Nasdaq Composite Index over the long term.
