Technology continues to have a major impact on the economy and investment landscape. This is never more apparent than when you consider the rise of cryptocurrencies. A totally new asset class has been spawned thanks to the internet.
And with that, Bitcoin (CRYPTO: BTC) has emerged. In the last 10 years, the world's leading digital asset has produced a monster return of 32,530% (as of April 3). It's been a volatile journey, but that gain is light years ahead of the stock market.
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Bitcoin's price is under pressure, down 22% from its peak, due to ongoing macroeconomic uncertainty. But the future could be bright. Where will Bitcoin be in 10 years?
We've all heard what the critics have said. Bitcoin's bears pointed to its extreme volatility, lack of intrinsic value and cash flows, energy consumption, usage among criminals, and regulatory uncertainty, to name a few examples. Despite these arguments, Bitcoin has stood the test of time.
These days, as a $1.6 trillion asset, Bitcoin is too hard to ignore. Perhaps its biggest risk factor, the potential of an outright U.S. government ban, is no longer an issue.
The Trump administration has taken actions that support the ongoing adoption of Bitcoin. The government announced a strategic Bitcoin reserve, freed Ross Ulbricht (creator of the dark web's infamous Silk Road digital marketplace), and placed a crypto-friendly chairman at the head of the Securities and Exchange Commission. There could be more easing of regulatory burdens in the future.
Before the latest upbeat developments, spot Bitcoin ETFs were approved for trading in January 2024. This essentially legitimized Bitcoin in the financial world, opening up greater pools of capital to buy the digital asset. We're about 15 months past the introduction of these ETFs, which have proven to be incredibly popular. Among all of them, there have been more than $90 billion of inflows to date, making the launch of these ETFs successful. To be fair, though, the critics still have a point that Bitcoin remains volatile. While it's not as volatile as it was in its earlier days, its value still bounces around like that of a growth tech stock.
Even after an unbelievable gain in the past 10 years, Bitcoin still has the potential to generate strong returns between now and 2035.
Bitcoin's most compelling trait is its fixed supply. It's written in the software that there will be a max of 21 million coins, created at a pre-determined rate. Unless all the nodes running the network agree, this setup won't change. That hard cap is extremely intriguing. As demand goes up, the price should as well.
The supply limit is particularly noteworthy when viewed in comparison to fiat currencies. Government-issued money, like the U.S. dollar, euro, or Japanese yen, has increased in quantity. Holders effectively see their purchasing power erode each year.
The U.S., the world's economic superpower, has a huge debt problem. The country carries $37 trillion in debt, a figure that will continue to climb given the massive fiscal deficit we operate with. More money will be printed, leading to a higher money supply. Since Bitcoin is a risk asset that directly benefits from global liquidity, it's easy to see how Bitcoin will remain a long-term beneficiary of government deficits.
Just how much higher can Bitcoin go? I'm positive that future returns won't resemble prior returns. Bitcoin is maturing, likely making massive price jumps a thing of the past.
Gold has a current market value of $21 trillion. If Bitcoin gets to this level, it has 13-fold upside. I think that's a conservative view, as the crypto has superior properties versus the precious metal. Buying Bitcoin on the dip today and holding for 10 years could prove to be a very smart move.
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.