In its 15-year history, Bitcoin has (Cryptocurrency: BTC) It has created many millionaires. In fact, data from blockchain analytics platform Glassnode shows approximately 115,000 wallet addresses with current balances of more than $1 million.
But what are the chances that you'll one day join this select group? For patient or long-term investors, the answer may surprise you.
A quick look at Bitcoin's price over the years shows that the most explosive rises occurred in its early years. From 2009 to 2012, the world's original cryptocurrency soared from less than a tenth of a penny to more than $5. That's a whopping 710,000% increase. Bitcoin currently trades for about $65,000, and an investment of just $75 would be enough to make you a millionaire, back when Bitcoin was worth about $5.
As surprising as it may sound, the world's original cryptocurrency still has plenty of opportunities to make millionaires, even though the days of trading for less than $100, let alone $10,000, are probably behind us. There are complex simulations and complex theories that can help you figure out Bitcoin's ability to make you a millionaire in the future, but some simple calculations can also help.
Half-life phenomenon
Bitcoin performance is often analyzed in relation to the halving. These halvings, which occur approximately every four years, reduce the inflation rate by half and serve as easy markers to break up Bitcoin's existence into natural cycles.
One notable observation made by Bitcoin analyst Willy Wu is that holding Bitcoin through at least one halving cycle, or about four years, has never yielded negative returns. I'm saying that. During this period, Bitcoin returned an average of 30% annually. In other words, even if an investor buys at the peak of a bull market, he or she could end up earning a 30% annual return if held for at least four years.
For those considering #Bitcoin. Remember to keep it for 4 years. For 4 years of investment, no matter how bad the timing, the return will never be less than 30% per annum…BTC: 30-60%, drawdown 75%SP500: 10%, drawdown 35%Real estate: 10 %, drawdown 30%+VC funds: 15 %-27%, 10 year lockup
Although this is a lower bound scenario, it can be used as a baseline for investors to show what it takes to become a Bitcoin millionaire. Assuming an annual return of 30%, to become a millionaire he would need to invest approximately $85,500 per year for five years. Over 10 years, this number drops to about $18,250. For 20 years, he would only have to invest $1,225 per year.
If you expand your perspective beyond four years, your potential for wealth creation expands significantly. Considering that the average annual return over the entire history of Bitcoin (not just the four-year halving) is around 170%, the timeline accelerates and the amount of investment required is significantly reduced.
your chance is today
It is important to recognize that past performance does not guarantee future results. However, the fundamental numbers behind Bitcoin remain unchanged. The core of Bitcoin's value proposition revolves around his one key number: 21 million.
There is a limited supply of 21 million Bitcoins, and due to the continuous reduction in the Bitcoin issuance rate due to halving, the relationship between supply and demand is such that the price tends to increase more and more over time.
As an investor, understanding and accepting these fundamental principles of supply and demand provides a solid foundation for weathering market volatility. Although short-term fluctuations and speculative trends can affect prices, the long-term trajectory of Bitcoin's value is supported by its scarcity and increasing utility. After each halving, prices tend to rise sustainably, creating an attractive opportunity for hopeful billionaires.
RJ Fulton has a position in Bitcoin. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
Should you invest $1,000 in Bitcoin right now?
Offers from The Motley Fool: Before buying Bitcoin stocks, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and Bitcoin wasn't among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor We provide investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks every month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of April 15, 2024
