There are thousands of cryptocurrencies on the market, making the investing decision process extremely difficult. Yet there is a simple and straightforward solution to ensure your portfolio grows -- buy Bitcoin (BTC 3.69%).
Investing in Bitcoin can be seen as boring or as limiting possible gains. Investors often invest in obscure or less proven cryptocurrencies in hopes that they have found the next Bitcoin. However, to believe that Bitcoin doesn't still have immense long-term potential is a gross mistake.
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The big money is coming
The approval of spot Bitcoin exchange-traded funds (ETFs) in January not only marked another milestone for the cryptocurrency but also opened the doors for a new set of buyers. Previously confined to traditional assets like stocks, bonds, and mutual funds, the $100 trillion wealth management industry now has direct access to Bitcoin. With managers at pension funds, retirement accounts, and endowments seeking Bitcoin exposure, analysts anticipate that this development will prompt an influx of capital from wealth managers into the Bitcoin market.
Various simulations and studies have been conducted to determine just how much capital that could be, with many suggesting about a 2% allocation as a safe bet. Although this percentage may seem modest, if 2% of the $100 trillion wealth management industry were to make its way to Bitcoin, it could nearly double the cryptocurrency's price.
Furthermore, a 2% allocation may be conservative and some analysts expect 5% to be considered reasonable. At 5%, Bitcoin's price would reach more than $300,000.
Some have more aggressive predictions, such as Ark Invest Chief Executive Officer Cathie Wood. Conducting its own study, her firm concluded that a 19% Bitcoin allocation from the wealth management industry shouldn't be ruled out. At a 19% allocation, Bitcoin's price could soar well past $2 million.
More than just a financial asset
As impressive as the numbers are when it comes to estimating the adoption of Bitcoin by wealth managers, these are just estimates and obviously may turn out to be wrong. However, the beauty of Bitcoin is that in some regards, it behaves more like a natural system than a financial asset, and that can provide novel insights about what its future might hold.
Giovani Santostasi, a physicist turned Bitcoin analyst, noticed this phenomenon when applying the mathematical concept known as a power law to the cryptocurrency. Assuming that Bitcoin possesses similar characteristics to natural and social systems, this theory describes how one value grows exponentially in relation to another. Bitcoin's behavior, driven by network dynamics rather than typical asset patterns, aligns with this principle.
This theory outlines how Bitcoin's adoption, price, and network security interact in a continuous loop akin to the feedback loops found in ecosystems or social media platforms. Rising adoption leads to increased security, attracting more users and fostering further adoption -- a cycle that repeats indefinitely.
With Bitcoin following a semipredictable growth rate, Sanostasi developed a model to project its future price. Since he introduced it, in 2018, it has been remarkably reliable. Most importantly, though, his model suggests Bitcoin's price will be no lower than $1.6 million and as much as $10 million by 2040.
The old adage, "No model is perfect, but some are useful," might be applicable here. None of this should be taken as gospel, but they do suggest that Bitcoin still has plenty of potential. With its proven track record of reliability, market dominance, and influence on other digital assets, Bitcoin remains the ultimate cryptocurrency to invest in today. See you in 2040.
