With the stock market off its record high, it looks like investors have adopted a more cautious approach toward cryptocurrencies as well. After the market cap of the digital asset industry peaked at about $3.7 trillion in December, it has fallen 22% (as of March 24). The asset class is once again showing investors how cyclical it can be.
If you're a long-term investor, though, then there's an opportunity to take advantage of the volatility and fear. In fact, there's one cryptocurrency, which is currently trading 19% off its peak, that has 14,623% upside. That's according to Michael Saylor, the founder, former chief executive officer, and executive chairman of MicroStrategy, an enterprise software company that is incredibly bullish on a single digital asset.
Here's what investors need to know that just might force them to become huge supporters of this crypto.
Base-case upside
Saylor first decided that it would be wise for his company to purchase and hold Bitcoin (BTC 1.96%) on its balance sheet back in August 2020. His thinking was influenced by just how much government stimulus had entered the economy after the onset of the COVID-19 pandemic, which made cash a terrible holding. The view was that Bitcoin would maintain and increase purchasing power.
During the past few years, MicroStrategy has transformed into a Bitcoin holding company, raising debt and equity capital to buy more of the crypto. It currently owns more than 500,000 coins.
In Saylor's base case, Bitcoin's price will reach $13 million in 2045. Compared to the cryptocurrency's current price of about $88,300, that presents upside of 14,623%, or a 147-fold rise. This translates to a fantastic 28.4% compound annual growth rate. Saylor sees 7% of global wealth finding its way to Bitcoin in this instance.
The bull case predicts a monster $49 million price by 2045. Even in the bear case, Saylor thinks Bitcoin's price can rise 34-fold to $3 million per coin. All these scenarios depend on different levels of worldwide capital eventually being allocated to Bitcoin, at the expense of assets like stocks, bonds, or real estate. But regardless of how much optimism you have, it's clear that Saylor has huge hopes for what the future will bring.
CRYPTO: BTC
Key Data Points
Fixed supply
Saylor has become somewhat of a legend in the Bitcoin community. He's a vocal supporter who has put his money where his mouth is. And in theory, his 2045 outlook for Bitcoin makes sense. All it takes is more of the capital in the world flowing from other assets to the leading crypto.
But investors must always take forecasts with a grain of salt. It's so incredibly difficult to make accurate predictions, especially so far into the future and with a financial asset that's still in the early phases of its development and adoption. Saylor's outlook can give you some confidence. However, there is another factor that will make you bullish.
Bitcoin has a fixed supply cap of 21 million coins. This might be its most singular trait. I think Saylor views this as the main reason more capital will go to Bitcoin. Investors should want to own assets that aren't being debased with an ever-increasing level of supply. That scarcity is valuable.
Owning an asset with a fixed supply right now seems like a compelling opportunity. That's because of just how troubled the monetary system is. The U.S. government, for example, is running a huge fiscal deficit, with a debt burden that continues to rise. There is really no end in sight to this worrying trend. With fiat currencies losing their purchasing power, buying and holding Bitcoin looks like the smart move.
As part of a well-diversified portfolio, I believe it makes a lot of sense to own some Bitcoin. Of course, it's critical to adopt a long-term mindset. And be prepared for volatility along the way.
