Bitcoin (BTC 3.54%) has been on a tear lately, with its value rising rapidly as investors grow increasingly optimistic about cryptocurrencies in general. The recent optimism comes from years of Bitcoin's rising value, which is up 500-fold during the past decade.
The astronomical gains Bitcoin has made during the past 10 years have no doubt minted millionaires. If you had invested just $2,000 in Bitcoin a decade ago, you would have nearly $1 million today. So it's reasonable for investors to wonder if Bitcoin can mint more millionaires?"
Although I think Bitcoin could prove to be a good long-term investment in the coming years, I'm skeptical it will have the same ability to make millionaires during the coming decade. Here are three reasons why.
Image source: Getty Images.
1. Bitcoin's price appreciation would need to be astronomical
You're probably familiar with the common investing phrase, "Past performance is no guarantee of future results," and this disclaimer may be especially true when it comes to cryptocurrencies, including Bitcoin. To mint millionaires, Bitcoin would have to continue its stratospheric gains after a decade's worth of explosive growth.
That seems unlikely, especially considering that one of the recent catalysts for Bitcoin's rise came with the introduction of Bitcoin exchange-traded funds (ETFs). These Bitcoin ETFs have given investors an easy way to buy the cryptocurrency -- without some of the hassles of owning the coins themselves -- and their popularity has contributed to Bitcoin's rise. The one dozen Bitcoin ETFs have more than $100 billion under management after less than two years in existence.
Even if Bitcoin's value continues to rise significantly, the cryptocurrency has also had long stretches of minuscule gains and negative returns. Rising inflation caused an exodus from Bitcoin beginning in late 2021 and pushed its value down 73% in just one year. Several years before that, Bitcoin's value dropped by 83% between December 2017 and December 2018 on regulatory concerns, crypto exchange breaches, and a pullback from speculative investments. Bitcoin's volatility means that significant losses could be just as likely as positive returns in the coming years.
2. Bitcoin's regulatory environment can shift rapidly
Bitcoin's value popped after Donald Trump was elected president and has, mostly, made significant gains since he took office. The cryptocurrency's value has risen 64% since the November 2024 election (as of Sept. 24).
Cryptocurrency investors were hopeful that the Trump administration would take a more relaxed approach to investing in digital currencies, and it has. The administration has backed away from some crypto lawsuits by federal agencies, announced a planned Strategic Bitcoin Reserve, and reduced some regulations.
Not all the moves have been good (I'm looking at you, Official Trump meme coin), but some have certainly contributed to Bitcoin's increase in value. But if we fast-forward three years and imagine an administration that takes a more hardline approach to cryptocurrencies, it's not difficult to envision Bitcoin's value tumbling.
CRYPTO: BTC
Key Data Points
3. A difficult economy could test Bitcoin's resilience
Rising cryptocurrency values are often reliant on positive news, or at least the absence of bad news. For example, Bitcoin plummeted by 12% in the weeks after Trump's "Liberation Day" tariff announcement in April.
Although Bitcoin's value has rebounded since then, more persistent bad news -- like an economic slowdown or recession -- could cause Bitcoin's value to drop, and there are some warning signs on the horizon. Government data for June showed a loss of 13,000 jobs, and in August, just 22,000 jobs were added, much less than economists' average estimate of about 75,000.
What's more, the percentage of small businesses with unfulfilled job openings fell to 32% in August -- its lowest level since mid-2020. Small businesses contribute to more than half of U.S. jobs, so a slowdown in new positions could be a concern.
While the economy hasn't officially slipped into slowdown or recession, if the economic narrative changes, Bitcoin could experience substantial value declines.
Don't expect Bitcoin to make you a millionaire, but you don't have to avoid it either
Bitcoin has already delivered life-changing gains, but investors shouldn't expect lightning to strike twice. The odds of another 500-fold return are vanishingly small, and the risks from volatility, regulation, and economic uncertainty are real.
That doesn't mean Bitcoin is a bad investment -- just keep expectations realistic, and remember that most experts recommend limiting cryptocurrencies to 10% of your portfolio or less.
