The world’s top cryptocurrency may still have plenty of room to operate.
Bitcoin (BTC -0.41%) has created many billionaires. The world’s leading cryptocurrency has soared 12,590% over the past decade. That wild rise would have turned a modest $10,000 investment into $1.27 million. The same investment in an S&P 500 index fund would be worth only about $28,000 today.
Bitcoin disrupted the market as it grew from a niche token to a mainstream asset bundled into its own spot-price exchange-traded funds (ETFs). El Salvador and the Central African Republic have also adopted it as their national currency, and other inflation-stricken countries may follow suit in the coming years. So, could Bitcoin create more billionaires over the next decade? Let’s take a look back at its long-term catalysts and challenges.
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Why did the price of Bitcoin keep rising?
Bitcoin is mined using an energy-intensive “proof-of-work” (PoW) method that requires powerful ASIC (application-specific integrated circuit) miners. This process becomes more difficult every four years when a “halving” occurs, where mining rewards are cut in half. The supply of Bitcoin is also finite, with the last token expected to be mined by 2140.
Due to these properties, Bitcoin can be “minted” (by creating new blocks on the blockchain) or rewarded through less energy-intensive “proof of stake” (PoS). tokens are more similar to precious metals like gold or silver. method.
This stronger foundation supported the U.S. Securities and Exchange Commission’s (SEC) decision to classify Bitcoin as the only virtual currency that can be recognized as a commodity rather than a security. This key difference comes from the SEC’s decision to approve the market’s first spot-price Bitcoin ETF before greenlighting the first ETF for Ethereum (ETH -0.05%), which converted from PoW to PoS two years ago. confirmed the decision.
The price of Bitcoin has fluctuated several times over the past four years. In 2020, the stock soared 322% as stimulus checks, social media buzz, and the growing popularity of crypto trading platforms attracted new investors. Bitcoin’s third halving in May 2020 also further tightened supply. In 2021, the price of Bitcoin rose another 47% amid a buying frenzy.
However, Bitcoin’s price fell by 48% in 2022 as rising interest rates pushed investors toward more conservative investments. That “crypto winter” cooled the notion that Bitcoin was a safe-haven asset or a reliable hedge against inflation. In 2023, the price of Bitcoin rose 31% as interest rates stabilized. This increase continued into 2024, with prices up 44% since the beginning of the year. This was driven by the approval of spot-price ETFs in January, the fourth halving in April, and expectations for rate cuts.
Could Bitcoin generate more millionaire profits?
While this recovery has been impressive, Bitcoin’s long-term price targets remain wide-ranging. Social Capital’s Chamath Palihapitiya predicts it will reach $500,000 by late 2025, Fidelity’s Julian Timmer predicts it will reach $1 million between 2028 and 2030, and Ark Invest’s Cathie Wood claims it could soar to $3.8 million by 2030.
These bullish estimates should be taken with a grain of salt, but they are all based on long-term expectations for lower interest rates, increased institutional purchases of Bitcoin, and increased adoption of Bitcoin as a reserve asset. Bulls also predict that the next halving in 2028 will see supply even tighter as demand increases.
However, Bitcoin’s market cap is already $1.2 trillion, compared to silver’s $1.7 trillion and gold’s $17.5 trillion. If Bitcoin’s price rose from $60,000 to $500,000, its market capitalization would reach $10 trillion. If it reaches $1 million, it could reach a market capitalization of $20 trillion, surpassing gold as the world’s most valuable asset.
But that may not happen unless the dollar and other fiat currencies experience a catastrophic collapse and more investors turn to Bitcoin. Even if the price of Bitcoin rose to $1 million over the next 10 years, a new $10,000 investment would only be worth about $167,000. While this is a huge profit, it still falls short of the profits made by billionaires over the past decade. Bitcoin may create a few more billionaires in the future, but they will likely need to invest more cash to reach that goal, while expecting the long-term returns to be modest. there will be.
Leo Sun has no position in any stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
