Bitcoin
Is Bitcoin a Millionaire Maker?
Along Bitcoin(CRYPTO: BTC) has made thousands of millionaires in its 15-year history. In fact, we know exactly how many there are. Data from Glassnode, a blockchain analytics firm, shows approximately 104,000 Bitcoin wallets worth more than $1 million today.
However, after experiencing such a dramatic rise over the years, it’s natural to think that your chances of joining this exclusive club have gone down the drain. But what if I told you that Bitcoin still has what it takes to make new millionaires?
Image source: Getty Images.
Why Bitcoin is the ideal asset
To put it simply, for Bitcoin to continue making millionaires, its price needs to keep rising. This isn’t rocket science, but a more subtle dynamic is at play here that makes it Bitcoin uniquely suited to continue rising as it has done over the past 15 years. One of the main factors in this dynamic is Bitcoin’s finite supply. Bitcoin’s supply is capped at 21 million coins, making it more likely to appreciate in value over time due to simple supply and demand dynamics.
Bitcoin’s hard cap means that as demand increases, the price is likely to rise. There are currently 19.6 million Bitcoins in circulation, with the remaining 1.4 million coins gradually entering circulation until 2140. This slow and decelerated release of new coins ensures that Bitcoin remains scarce. As long as demand continues or grows, this scarcity should drive the price higher.
Comparatively, other assets like stocks can undergo splits, which increases the number of shares and can dilute the value. Gold, another popular store of value, is diluted as new gold is discovered and mined. Bitcoin, however, cannot be diluted in this way. Its decentralized and distributed network ensures that there will only ever be 21 million Bitcoins, making it an ideal asset for creating millionaires. There is no room for game-changing inflation in this system.
Scenarios for investors to consider
Whether Bitcoin can create new millionaires depends on two factors: how much you invest and how high Bitcoin goes. The higher Bitcoin goes, the less money you need to invest to become a millionaire. The underlying question here is how high Bitcoin can go. While no one knows for sure, several studies and analyses suggest that Bitcoin could one day be worth more than $1 million per coin.
One of my favorite models for predicting the future price of Bitcoin is the Bitcoin Power Law Theory, created by astrophysicist Giovanni Santostasi. The Power Law is a statistical principle that describes phenomena in the natural world, such as the size of cities, the number of species in an ecosystem, and the distribution of wealth. Applied to Bitcoin, the Power Law fits surprisingly well, as Bitcoin exhibits characteristics of a natural network rather than a manipulated system like fiat currencies.
The story continues
Just as the Power Law is applied to natural phenomena like the distribution of city sizes or the prevalence of species, it can also be used to analyze Bitcoin through the variables of users and transactions. This model quantifies the number of Bitcoin addresses and transactions to correlate with Bitcoin’s price growth. It predicts that Bitcoin could reach a fair market value of over $1 million by 2032 and potentially skyrocket to over $4.5 million by 2040. This approach highlights how network effects drive Bitcoin’s growth, offering a robust framework for understanding its long-term price potential.
Another noteworthy analysis comes from ARK Invest. After examining various scenarios and factors, ARK Invest projects that Bitcoin could reach $3.8 million by 2030 as institutional investors begin to allocate more capital to the cryptocurrency.
While these projections may sound sensational, it’s hard to ignore that Bitcoin has consistently defied expectations. In 2015, few could have predicted that Bitcoin, then trading at just $1,000, would reach over $70,000 within a decade. While the future is uncertain, Bitcoin has a history of surprising markets and will likely continue to do so for decades to come.
What it takes to be a millionaire
Let’s keep it simple. If Bitcoin hits $1 million, you would need to own a whole Bitcoin to become a millionaire. If it hits $2 million, you would need half a Bitcoin. At $4 million, you would need a quarter of a Bitcoin, which is worth about $13,000 at today’s prices.
While past performance is no guarantee of future results and no model is perfect, Bitcoin’s unique characteristics make it a strong candidate for continued price appreciation. Its finite supply, coupled with increasing demand and growing acceptance, presents a compelling and clear case for long-term growth more than many other assets.
While Bitcoin is not a get-rich-quick scheme, it has been a rewarding asset for patient investors. The future of Bitcoin remains bright, and its potential to create new millionaires is far from exhausted.
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RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Is Bitcoin a Millionaire Maker? was originally published by The Motley Fool