With a trailing 10-year return of 40,000% (as of July 25), Bitcoin (BTC 0.18%) has been a monster wealth creator. Had you invested $10,000 in this top digital asset in late July 2015, you would be staring at a balance of $4 million in your portfolio today. That's an unbelievable gain.
Bitcoin is not far off its peak, with the cryptocurrency trading at more than $117,000. If you invest $10,000 in Bitcoin today, how much will it be worth in 2035? There are three possible answers.
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Bear case: lower than $100,000
The bear case, which I view as an unlikely, would require the progress we've seen to reverse course. This pessimistic outcome would involve governments banning it, particularly the U.S. That seems like a low-probability event, given how much the White House has embraced Bitcoin.
But Bitcoin could fall victim to advancements in quantum computing that could crack the crypto's public key cryptography. This could expose the network to hackers who want to steal private keys and take investors' crypto.
There could also be competition from other cryptocurrencies that pop up. Or maybe Bitcoin just doesn't gain broader adoption as many hope, which would lead to it becoming irrelevant.
If these things play out, I wouldn't be surprised if Bitcoin's price falls below $100,000 in 2035.
Base case: between $600,000 and $1.2 million
It's time to be more optimistic. During the next decade, Bitcoin will become more popular among market participants, namely individual and institutional investors, corporations, and governments. This would simply be a continuation of the trends that are already happening, supported by a more favorable regulatory backdrop.
Perhaps Bitcoin also makes progress as a more widely used medium of exchange, something critics argue won't happen. Further development of the Layer-2 scaling solution known as the Lightning Network could help in this regard, speeding up the network's transactions and reducing user costs.
The base case has Bitcoin's price reaching between $600,000 and $1.2 million in 10 years, or five- to 10-fold higher than today. This is a realistic outcome.
Bull case: $5 million
A lot of variables need to fall into Bitcoin's favor for the bull case to become a reality. One possibility is that central banks start to own Bitcoin as a reserve asset. Right now, no central bank does this. But it could introduce tremendous demand for Bitcoin, pushing the price up to unseen levels.
Bitcoin's progress as a medium of exchange, particularly if it becomes more entrenched in the payments system, would boost its usage. If we start to use Bitcoin to pay for things on a daily basis, the price will surge. What's more, the financial ecosystem of Bitcoin-related products and services could keep expanding.
This extremely bullish outlook would see Bitcoin's price get to $5 million or more in 10 years.
Somewhere in the middle
Running these types of scenario analyses can be incredibly valuable. It helps investors figure out what could happen, thinking through different variables that can affect Bitcoin's price. It's always a smart idea to take predictions with a grain of salt. However, I'm certain Bitcoin won't generate another 40,000% gain in the next decade.
The base case seems the most realistic, in my opinion. It would only require a continuation of the factors we're already seeing play out, like Bitcoin finding its way into more portfolios and continuing progress with the Lightning Network.
Bitcoin's trajectory during the past 15 years, being able to always bounce back from the lows and navigate various macro and industry disruptions, gives me confidence that it isn't going anywhere, rendering the bear case as a very unlikely scenario. And when it comes to the bull case, this could happen decades down the line.
Based on this perspective, a $10,000 investment in Bitcoin today could be worth $50,000 to $100,000 by 2035.
