Cryptocurrencies are without a doubt extremely volatile. And some might still view them as being way too risky. However, investors can no longer ignore the market due to the monster gains that can be achieved by picking the right digital assets early on.
One of these has done very well over the long term. And billionaire tech executive Michael Saylor thinks that we are still in the early innings and that the future is bright. Saylor believes that this top cryptocurrency will soar more than 19,500% over the next 21 years.
Here's what investors need to know.
Image source: Getty Images.
The thesis is straightforward and easy to understand
Michael Saylor is incredibly bullish on Bitcoin (BTC +3.13%). Any investor who follows the space won't find this surprising. He founded and was the CEO of MicroStrategy, now called Strategy, a business analytics firm, and he's now the chairman. He completely upended how his business operates roughly five years ago, and many in the Bitcoin community now view him as somewhat of a legend.
After the onset of the pandemic, Saylor became fully aware of the huge amounts of government stimulus to boost the economy. As a result, he understood how much value fiat currencies lose over time, diminishing people's purchasing power in the process. In an effort to improve his company's financial picture, he adopted a Bitcoin treasury strategy, directing cash to acquire more of the crypto for its balance sheet.
CRYPTO: BTC
Key Data Points
Strategy first purchase Bitcoin in August 2020. Since then, the business has accumulated so much of it that it now owns over 640,000 of the digital tokens, which are worth more than $68 billion today, making it one of the largest holders. It's no coincidence that Strategy's stock price has shot up 1,660% in the past five years (as of Oct. 17).
In June, Saylor came out with a new prediction: Bitcoin's price will reach $21 million by 2046; this beats a prior forecast. His view has improved due to favorable regulatory changes, especially here in the U.S.
However, the main thesis hasn't really changed. Saylor's view is that more of the world's wealth will find its way to Bitcoin. This means that capital will flow from other asset classes, like real estate, fixed income, and equities, and this will ultimately drive the crypto's price higher over time.
No matter how exciting the forecasts sound, investors should take them with a grain of salt
Investors should realize that making accurate predictions is virtually impossible. This applies to the stock market, of course, but it also applies to the wild world of cryptocurrencies, which are still a relatively new phenomenon. Saylor's forecasts can drive extreme excitement from Bitcoin's supporters, but no one has any clue what its price will be five years from now, let alone decades from now.
But I think one thing is certain, and that is that any long-term investor who has at least a decade-long time horizon should consider making an investment in Bitcoin. It's important not to follow an expert's way of thinking without considering the opportunity yourself.
In this instance, Bitcoin is an attractive investment because it's the world's first and most valuable cryptocurrency. It continues to be viewed in a favorable light by politicians and by major financial institutions. It has tremendous network effects supporting it. And the brand image is strong, as Bitcoin is the first crypto that investors likely become familiar with.
Most importantly though, the hard supply cap of 21 million adds scarcity. And this won't likely ever change, unless its stakeholders want to make the network worthless.
As part of a well-diversified portfolio, a small position in Bitcoin makes sense. Whether or not its price reaches $21 million in 21 years might be beside the point. However, it still has meaningful upside over the long term.
