Investing in unproven technologies is a risky endeavor. But if investors have done their homework and have conviction, it certainly makes sense to take a position. What was a risky bet in the early days over time starts to look more like a safer opportunity. That's what I think has occurred with a top digital asset, even though there is still tremendous upside.
In the past decade, this cryptocurrency's price skyrocketed almost 22,000% (as of Jan. 26). I predict that it could rise tenfold over the next 10 years if this happens.
Image source: Getty Images.
Fulfilling the digital gold narrative
On the morning of Jan. 26, Bitcoin's (BTC 0.38%) market cap was $1.7 trillion. I think it's very realistic that this figure could increase tenfold, driving the popular digital asset's market cap to $17 trillion in early 2036. This would result in a much lower gain than the 71% annualized return we've been enamored with over the past decade. And it would imply a Bitcoin price of about $880,000 in 2036.
The basis of this prediction is simple and straightforward. Gold is the best asset to compare to Bitcoin. Gold has been on a fantastic run, with its price soaring 99% in the past 24 months (as of Jan. 26). The value of all above-ground gold is estimated to be $35 trillion. It's reasonable, in my view, to see Bitcoin reach half the value in 10 years that the precious metal is today.
The only thing that needs to happen is that more individuals, companies, asset managers, and governments start to view Bitcoin as a better store of value and portfolio holding. This sounds easy enough, but gold's impressive recent performance shows that Bitcoin still has a lot of work to do to win over more people around the world, especially those thinking about geopolitical uncertainty and burgeoning sovereign debt.
But I remain bullish. Cathie Wood-led Ark Invest sees Bitcoin fulfilling the digital gold narrative as the most important variable in its outlook.
CRYPTO: BTC
Key Data Points
Set up for success in an increasingly digital world
Gold's biggest advantage is that it's been a top store of value for thousands of years. That longevity and safe-haven status is important for many market participants, particularly those in charge of huge sums of capital.
Bitcoin is superior in many ways, however. It's more portable, verifiable, divisible, and resistant to censorship. Bitcoin is also scarcer, with an absolute cap of 21 million units to its supply.
And the fact that the cryptocurrency is purely digital means that it's best positioned to thrive in a world that is only going to become more impacted by things related to technology, artificial intelligence, and the internet.
