In 2020, Michael Saylor, then the chief executive officer of the business software company Strategy (MSTR -5.08%), made a bold decision. He decided to use the company's capital to begin accumulating Bitcoin (BTC -2.61%), the world's most valuable cryptocurrency. At the time, the move seemed incredibly risky, and many people to this day still view the decision as risky.
But Saylor's decision paid off handsomely, and Strategy (formerly known as MicroStrategy) even began tapping the capital markets for funding to buy more Bitcoin. Today, Strategy is seen as the pioneer of the Bitcoin treasury movement, and the company's stock has blasted over 3,160% higher in the past five years. Saylor, who is now the executive chairman of Strategy, thinks the party has only just begun. He sees the price of Bitcoin rising 17,888% from current levels during the next two decades. Here's why.
Remember the number 21
Making big calls on Bitcoin is nothing new for Saylor. Last year, Saylor predicted that Bitcoin could hit $13 million per coin by the year 2045. This argument was based on two main theses.
Image source: Getty Images.
At the time of this call, Bitcoin only made up about 0.1% of all global net worth. Saylor predicted that continued adoption from institutional and retail investors could propel Bitcoin to 7% of all global net worth. Saylor also said that Bitcoin, even as its volatility declined, was capable of generating a 29% annual rate of return, which would take the token to $13 million.
However, a lot has changed since then, and in June, Saylor hiked his price target to $21 million during the next 21 years. Most of the change seems to be attributed to the shifting regulatory environment ushered in by President Donald Trump, who has been very supportive of the sector.
"Stuff that's happened in the past 11 months has been extraordinary. The White House has embraced Bitcoin. This is an extraordinary development. We didn't anticipate this," Saylor said at a Bitcoin conference in Prague earlier this year. "Although we thought we might have a pro-Bitcoin president, we didn't think we'd get a strategic Bitcoin reserve. We didn't think that the president would say America would be the Bitcoin superpower of the world. This is an amazing development."
Saylor is, of course, right about all of this. Trump's support of crypto has been far beyond anything most could have imagined during the presidential election campaign. Congress recently passed the Genius Act, which will create a broad framework for stablecoins. The Clarity Act, which would create a broad framework for all cryptocurrencies, also has a good chance of passing Congress if the Senate approves the bill. This new legislation could help clear up regulatory uncertainty that has served as a roadblock in the past.
Furthermore, Trump recently signed an executive order that would pave the way for 401(k) accounts to purchase cryptocurrencies, which could significantly increase demand. Former President Joe Biden's administration took a much stricter approach to crypto regulation, and in a matter of months the situation has done a full 180.
Take Saylor's prediction with a grain of salt
No matter who is making the call, I would always advise that investors take crypto price predictions with a grain of salt. Cryptocurrencies are much harder to value than stocks -- and it's not like it's that easy to make accurate price predictions about stocks. Saylor's call looks to be predicated on napkin math at best.
That said, Bitcoin has become a more promising investment. A portion of investors now view Bitcoin and its 21 million coins as a form of digital gold and therefore a way to hedge inflation and market volatility. BlackRock has come out and said that investors can allocate as much as 2% of a multi-asset portfolio to Bitcoin, and the regulatory environment is going to allow many more institutional investors and mainstream financial institutions to get involved with crypto.
I'm not sure where Bitcoin will be in 21 years, let alone next year. But I do think investors can hold some in their portfolio and that it will be a good long-term investment because it potentially serves as a unique diversifier.
