You will struggle to find assets that have performed better than Bitcoin (BTC 0.25%). In the past 10 years, the top cryptocurrency has seen its price skyrocket 46,000% (as of May 27). This would have turned a $1,000 investment into a jaw-dropping $461,000 today.
Investors are surely wondering what the future holds. Where will Bitcoin be in 10 years?
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Bitcoin's scarcity
Bitcoin has been around for about 16 years. It has stood the test of time despite numerous price declines of more than 50%. There have been crypto exchange failures and investors have lost their coins. But it's worth mentioning that the Bitcoin network itself has never been hacked.
That durability is a positive factor that should give investors confidence. The longer Bitcoin stays relevant, the lower the chance that it falls by the wayside.
And over time, a higher number of market participants, whether that's individuals, institutions, or politicians, are learning about what makes Bitcoin truly special, which is its fixed supply of 21 million coins. This is in stark contrast to the ever-increasing amount of fiat currency there is in the world. The growth of the money supply in the U.S., as well as federal debt, is showing no signs of slowing down.
This makes the value proposition of owning a purely digital, decentralized, and scarce asset strikingly clear.
Bitcoin's network effect
The great Warren Buffett once called Bitcoin "rat poison squared." His view is understandable, as the cryptocurrency doesn't generate revenue and cash flows like a typical business does, which is what Buffett wants to see. But the Oracle of Omaha appreciates companies that possess economic moats. Applying that same framework to Bitcoin would make anyone bullish.
Its current market cap dwarfs any other blockchain, now at $2.1 trillion. Being the oldest and most valuable cryptocurrency means that Bitcoin has an unrivaled network effect. More users make Bitcoin more valuable to all other stakeholders. Unless a cryptocurrency is magnitudes better than Bitcoin at being a decentralized and secure store of value, there is minimal risk that a newcomer will topple it.
Bitcoin's clear network effect benefits it in another very important way, which is the development of various tools that support its adoption. This includes hardware wallets, mining equipment, and an expanding ecosystem of financial services.
All of this shows that Bitcoin's network effect has supported its rise up to this point. This key competitive advantage increases the chances that this digital asset will not only survive but thrive over the next decade and beyond.
Bitcoin's 10-year price target
I think it's always a good idea for investors to take analyst stock price targets with a grain of salt. The same is true with cryptocurrencies. That's because the future is unpredictable, and humans are terrible at making accurate predictions.
However, that doesn't mean assessing what Bitcoin could be worth by 2035 is a waste of time. I actually think it's a valuable exercise to figure out what things could look like, just so investors have an idea of what the upside could be. Just don't expect Bitcoin to generate the same return during the next 10 years that it did in the past decade.
As of this writing, Bitcoin trades at about $106,000, not that far off of its record high. It might seem like a bad time to put money to work near a peak. But consider that gold, which is arguably Bitcoin's most direct competitor as a global store of value, has a market value of $22.1 trillion. As the world becomes increasingly digital, I don't believe it's a stretch for Bitcoin to one day exceed the precious metal.
Of course, it's anyone's guess as to the ultimate time frame for that happening. If Bitcoin has more than 10-fold upside from today's level, then it seems like a smart investment to make with a 10-year outlook.
