Bitcoin (BTC +2.87%) has clearly been a fantastic investment, despite its volatile nature. During the past 10 years, the top digital asset has skyrocketed 41,200% (as of Oct. 17). Investors would struggle to find a better-performing asset. After seeing such a monster gain, it's important to think about what the future will look like.
Where will the world's leading cryptocurrency be in 10 years? I don't think it will be surprising to see Bitcoin's price rise 10-fold. But it's critical that investors understand both the headwinds it could face and the tailwinds that can help it.
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Investors should pay attention to Bitcoin's risks
Bitcoin's long history, having been around for almost 17 years now, adds support to the argument that it isn't going away. However, that doesn't mean there aren't risks to pay close attention to.
The first is the possibility of changing regulations. The current presidential administration has been very favorable toward Bitcoin and cryptocurrencies. But the next president might roll back some of these accommodative laws. You just never know. And that could deal a blow to Bitcoin.
Another risk is the potential for quantum computing. Further advancements in this area could pose a threat to Bitcoin's security, as quantum computers might be able to crack the crypto's public key cryptography. This would essentially make the network worthless. Bitcoin's developers are aware of this and can find ways to upgrade the blockchain.
There's also competition. For instance, stablecoins have grown rapidly this year, as they promise fast and cheap transactions across borders. Greater adoption here, plus the possibility of a new cryptocurrency entering the scene, could draw capital and attention away from Bitcoin.
CRYPTO: BTC
Key Data Points
Here's the case for Bitcoin rising 10-fold in 10 years
It's important to be mindful of risks. However, these don't take away from the fact that Bitcoin still has significant upside potential during the next decade. I believe there's a good chance this digital asset's price gets to $1 million by 2035.
Bitcoin's current market cap is $2.2 trillion. It wouldn't be surprising to see that figure approach the value of gold, which is about $30 trillion. The precious metal has been viewed as the top store of value for thousands of years. And it has had an impressive run this year, showcasing that it's still top of investors' minds.
But Bitcoin possesses qualities that make it superior to gold. Bitcoin is more divisible, portable, verifiable, and usable in transactions. This makes it a much better asset to own in a world that's only going to become more digital.
Even better, Bitcoin has a hard supply cap. There will only ever be 21 million units in circulation. This perhaps makes it the scarcest asset on Earth. Bitcoin's supply cap is enforced by all of the nodes helping run the network, as well as the halving event that happens roughly every four years, reducing Bitcoin's supply growth. If demand for Bitcoin suddenly surges, supply can't be adjusted to match it. Gold, on the other hand, isn't the same. If demand for the precious metal suddenly shot up, then miners would invest more resources in extracting gold.
Given Bitcoin's incredible price trajectory in the past, the world is starting to wake up to these extremely attractive characteristics. This is starting to affect how market participants allocate capital. Owning an extremely scarce asset that isn't controlled by anyone, is purely digital, and that transcends borders is a very compelling proposition.
That's why more financial institutions, companies, and governments are starting to get involved with Bitcoin. There's no reason to believe that this trend is going to let up during the next 10 years. This view is supported by ongoing fiscal mismanagement, especially here in the U.S., where federal debt levels will be significantly higher a decade from now. Bitcoin has thrived in this type of environment, and this will continue.
