Bitcoin may be controversial, but there’s no denying what it has done for long-term holders.
Cryptocurrency is still a hotly debated topic among investors, but its support is gaining steam. According to research by The Motley Fool, approximately 43% of surveyed investors in 2024 said they were likely to own crypto within the next year, compared to 23% in 2021.
Bitcoin (BTC -0.70%) remains the flagship cryptocurrency. Its market cap is the largest, at approximately $1.9 trillion today.
Although volatile, Bitcoin’s long-term performance stands out. The crypto’s price has appreciated by more than 32,000% over the past decade, compared to the S&P 500‘s total returns of 243%. Such returns can seem impossible to replicate, and perhaps they are. Yet, Bitcoin may still possess enough upside to produce life-changing wealth over time.
Can Bitcoin be your ticket to becoming a millionaire by 2040? Here’s what you need to know.
The tailwinds supporting Bitcoin’s rise remain intact
Some see Bitcoin as a controversial investment because it is a digital asset. It doesn’t technically represent an underlying business like stocks. Bitcoin’s value ultimately comes from supply and demand in the free market, which is partially why its price can sometimes be so volatile. But isn’t that how gold works? You generally can’t do much with gold, but it has value because society values it.
Why does society value Bitcoin? Like gold, Bitcoin is an anti-inflationary asset with three characteristics:
- People covet (value) Bitcoin.
- There’s only so much of it (supply capped at 21 million Bitcoin).
- Bitcoin is usually priced in U.S. dollars, a fiat currency.
The U.S. government and Federal Reserve have continually added dollars to the economy for decades. Inflation occurs when dollars increase faster than the value of goods and services. That’s why the same house costs more now than it did 30 years ago.
That’s not to say that Bitcoin has infinite value, but it’s still tiny in the grand scheme of things. The world’s gold supply is worth an estimated $17.9 trillion today. Society doesn’t value Bitcoin as broadly as gold, but it’s gradually gaining traction. If that continues, along with these decades-long inflationary trends, perhaps Bitcoin’s value can still increase significantly over the long term. Some believe one Bitcoin might be worth over 10 times its current price by 2030! Of course, only time will tell, and nobody knows for sure.
An emerging threat to Bitcoin that investors must know about
Since it’s a digital asset, you can’t physically validate Bitcoin like you could gold. Therefore, Bitcoin and other cryptocurrencies operate on blockchain technology, a sort of encrypted public ledger that acts to verify everything that happens with it. Send a Bitcoin to someone, and the transaction shows up on the blockchain for everyone to see. Maintaining its integrity is a key aspect of its value.
However, Bitcoin is over 15 years old. Recent breakthroughs in quantum computing represent a potential threat to Bitcoin’s viability if they become powerful enough to crack its encryption. Alphabet (Google’s parent) recently announced a quantum chip capable of a five-minute calculation that would take today’s supercomputers ten septillion years. That’s 10,000,000,000,000,000,000,000,000 years — older than the universe itself!
Experts estimate that it would take a far more powerful computer to crack Bitcoin, but that level of technology may eventually come. Some have speculated that Bitcoin may eventually need an upgrade to protect it from quantum computing. This is all speculation, but you should consider everything when investing for 15 years into the future.
Here is the best way to invest in Bitcoin
Even with as much success as Bitcoin has had over the past decade, the future is uncertain. Hopefully, this discussion made that clear. Investors should be excited about Bitcoin’s long-term potential, but they should still respect the potential threats and factors that could undermine its value to society. Ultimately, its value depends on society coveting it. Gold has stood the test of time, and time will tell whether Bitcoin can.
The best way to invest in Bitcoin is to treat it like any other investment. Consider the risk involved, and don’t keep more of your portfolio in Bitcoin than you’re comfortable with. Buy a little at a time and focus on the long term.
If you do that, you could achieve substantial long-term wealth if Bitcoin’s rise continues, while avoiding catastrophe if things don’t work out.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Bitcoin. The Motley Fool has a disclosure policy.
