Bitcoin may not be able to replicate the performance of the past decade, but it still has plenty of upside potential.
Despite the meteoric rise, Bitcoin (BTC 0.58%) There remains significant skepticism about how high this level will rise over the past decade. With Bitcoin trading near all-time highs, some investors may think it's too late to invest in cryptocurrencies.
But if anything, it is now coming into its own as an independent asset class. And while it's perfectly fine to be skeptical of cryptocurrencies, it's hard to find another asset class with the same kind of historical track record and long-term upside potential. Let's take a closer look.
“I don't think you'll get a good return on investment.”
According to The Motley Fool Ascent's 2024 Crypto Investor Trends Study, there are many reasons for skepticism towards cryptocurrencies. And oddly enough, one of them was the belief that cryptocurrencies can't bring enough returns. This reason is cited by his 29% of respondents who do not yet own one.
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Looking at Bitcoin's historical returns, this concern seems completely unwarranted. For a decade from 2011 to 2021, Bitcoin was the world's best-performing asset, but it wasn't even close.
The annualized return was 230%. The next closest asset class (high-growth tech stocks) returned just 20% annually. Bitcoin is up more than 150% in 2023, and is already up about 50% this year.
This track record of performance explains why Wall Street eventually adopted Bitcoin as an independent asset class. After years of naysayers, the world's largest financial institutions are finally waking up to Bitcoin's unique risk-reward characteristics and why it deserves to be included in many investors' portfolios.
We are currently witnessing this as huge amounts of money are being placed in new spot Bitcoin exchange-traded funds (ETFs) by institutional investors. More than $30 billion has flowed into these ETFs in less than three months.
Is it too late to invest in Bitcoin?
Skeptics will counter that past performance is no guarantee of future profits. So, certainly, Bitcoin will probably never repeat the performance of the past decade, which brought truly astronomical gains.
From a price of just $1 in February 2011, Bitcoin's value has soared to almost $70,000 today. When Bitcoin first started trading around $7,000, he waited until November 2017 to invest in Bitcoin, and his return on investment was still a whopping 10x.
So the big question is: Does Bitcoin still have room to rise 10x? The current price of almost $70,000 means the future price target is $700,000. While this number seems unusually high, Wall Street's price predictions may surprise you.
For example, a growing number of analysts and investors now predict that the price of Bitcoin will reach $1 million by 2030. The central figure is Ark Invest's Cathie Wood, who first suggested a $1 million price in 2022. She has since raised her price target to $3.8 million.
Clearly, a lot of things still need to go right for Bitcoin to rise this much in value. It needs more mainstream adoption. Institutional investors need to continue increasing their asset allocation to cryptocurrencies. Regulators need to create a better regulatory framework for cryptocurrencies. Blockchain developers need to create more uses for blockchain, and everyday users need to accept digital coins as part of the modern global financial system.
Looking at the big picture, we can see why many investors in The Motley Fool's 2024 Crypto Investor Survey were skeptical of cryptocurrencies.
However, there are many reasons to be optimistic about Bitcoin. For example, the recently launched Spot Bitcoin ETF could mark a turning point in crypto history if it leads to mainstream adoption.
I remain bullish given Bitcoin's historical track record and its very high upside potential. In the words of Winston Churchill, this is not the end, or even the beginning of the end, for Bitcoin. It's just the end of the beginning.
