On June 21, billionaire Michael Saylor, founder and executive chairman of Strategy (MSTR -0.49%) unveiled his latest price prediction for Bitcoin (BTC 0.11%): $21 million per coin. That's significantly higher than most mainstream Bitcoin predictions, which usually top out at around $1 million. A price of $21 million would require Bitcoin to soar in value by nearly 20,000%.
It would be easy to dismiss this prediction as just a pie-in-the-sky fantasy, except for one important fact: Bitcoin is up an extraordinary 216,474,168% since it hit an all-time low of $0.05 back in July 2010. Back then, nobody could have possibly predicted that Bitcoin would reach its current price of $105,000.
The path to $21 million
In a presentation ("The Power of 21") at a recent Bitcoin event in Prague, Saylor explained why he thinks Bitcoin will eventually hit a price of $21 million within the next 21 years.
For one, Bitcoin has a capped lifetime supply of just 21 million coins. The capped lifetime supply introduces tremendous scarcity. This theoretically ensures that any significant increase in demand will send its price soaring.
Secondly, Bitcoin is currently experiencing a period of rapid institutional adoption as investors race to add Bitcoin to their portfolios. If these investors decide to boost their crypto allocation by just a tiny amount, it could have a very significant impact on the price of Bitcoin.
Finally, Bitcoin has emerged as a true gold alternative. Many investors now refer to Bitcoin as "digital gold." They view it as a long-term store of value and a potential hedge against inflation, just like gold.
Putting all this together, Saylor thinks the path to $21 million is inevitable. If Bitcoin can grow at a steady rate of 29% per year for the next two decades, it can hit a price of $21 million by the year 2046.
Impact of Trump's pro-crypto policies
Last summer, at a Bitcoin event in Nashville, Saylor famously predicted that Bitcoin would hit a price of $13 million. At the time, Bitcoin was trading for just $65,000. Today, Bitcoin trades for $105,000 and now appears to have stronger tailwinds, thanks to the Trump administration's pro-crypto policies.
In his "The Power of 21" presentation, Saylor specifically points out the new pro-crypto approach of the Trump administration, which has led to new euphoria around Bitcoin as an asset class. The White House has gone all-in on Bitcoin, even going so far as to establish a Strategic Bitcoin Reserve.
Is a $21 million price realistic?
While Saylor thinks that it will take 21 years for Bitcoin to hit $21 million, it's still a pretty incredible price target. Based on a Bitcoin coin supply of 21 million, that implies a future valuation of $441 trillion. By way of comparison, the S&P 500 is currently worth about $50 trillion. The total value of global investable assets is usually estimated to be around $250 trillion.
Image source: Getty Images.
So, you can see what needs to happen, right? Bitcoin needs to establish itself as the preeminent asset class in the world, and all global wealth must start to flow into Bitcoin. At some point within the next two decades, investors will need to boost their Bitcoin allocations from 1% to 100%. That's asking a lot of investors since it will require them to break one of the fundamental rules of investing: Always diversify your portfolio.
Keep in mind, too, that Bitcoin has always been a very volatile asset, prone to boom-and-bust cycles. In order for Bitcoin to grow at a steady rate of 29% per year, investors have to assume that Bitcoin has finally broken out of this cycle. From here on out, it's upward only.
Finally, keep this in mind: Saylor has a very real reason to promote a very high price for Bitcoin. His company Strategy is now the largest corporate holder of Bitcoin in the world. The company now holds 592,345 Bitcoins, equivalent to almost 3% of all the Bitcoin in the world. That's more Bitcoin than even the U.S. government holds.
A more realistic target for Bitcoin
While the overall pace of Bitcoin adoption over the past year has been impressive, the math involved in Bitcoin hitting a price of $21 million requires a giant leap of faith. A more realistic price target might be $500,000 to $1 million.
However, even if Bitcoin "only" grows by a multiple of 5x or 10x over the next decade, that would likely still make it among the top-performing assets in the world. Thus, I'm still long-term bullish on Bitcoin. However, I'm not as convinced as Saylor that Bitcoin's boom-and-bust days are fully behind it.
