Despite the meteoric rise of Bitcoin (CRYPTO: BTC) during the past decade, significant skepticism remains about just how much higher it can go. With Bitcoin trading near all-time highs, some investors might believe it is simply too late to invest in cryptocurrency.
But if anything, it is just now coming into its own as a stand-alone asset class. And while it’s perfectly OK to be skeptical about crypto, it’s hard to find another asset class with the same type of historical track record and long-term upside potential. Let’s take a closer look.
According to The Motley Fool Ascent’s 2024 Cryptocurrency Investor Trends Survey, there are a number of reasons for the crypto skepticism. And curiously enough, one of them was the belief that crypto is unable to deliver a good return. This reason was cited by 29% of respondents who didn’t already own it.
Image source: Getty Images.
When you look at Bitcoin’s historical returns, this concern seems completely unjustified. During the 10-year period from 2011 to 2021, Bitcoin was the top-performing asset in the world, and it wasn’t even close.
Annualized returns were 230%. The next closest asset class (high-growth tech stocks) returned only 20% per year. In 2023, Bitcoin was up more than 150%, and this year, it is already up about 50%.
This track record of performance explains why Wall Street has finally embraced Bitcoin as a stand-alone asset class. After years of naysaying, the world’s biggest financial institutions are finally waking up to the unique risk-reward profile of Bitcoin and why it deserves a place in the portfolios of many investors.
We’re seeing this right now with the tremendous amount of money being deposited in the new spot Bitcoin exchange-traded funds (ETFs) by institutional investors. In less than three months, more than $30 billion has flowed into these ETFs.
Skeptics will likely counter that past performance is no guarantee of future returns. So, yes, maybe Bitcoin will never duplicate its performance of the past decade, when it delivered truly astronomical returns.
From a price of just $1 in February 2011, Bitcoin exploded in value to almost $70,000 today. Even if you waited to invest in Bitcoin until November 2017, when it first traded around the $7,000 mark, you’ve still made a whopping 10-fold return on your investment!
So the big question becomes: Does Bitcoin still have 10x upside potential? At today’s price of almost $70,000, that would imply a future price target of $700,000. While that number seems outlandishly high, you might be surprised by Wall Street’s price predictions.
For example, a growing number of analysts and investors are now predicting that Bitcoin will hit a price of $1 million by 2030. Chief among them is Cathie Wood of Ark Invest, who first suggested a $1 million price tag back in 2022. Since then, she has raised her price target to $3.8 million.
Obviously, a lot still needs to go right for Bitcoin to increase that much in value. There needs to be more mainstream adoption. Institutional investors need to continue to ratchet up their asset allocations of the crypto. Regulators need to create a better regulatory framework for crypto. Blockchain developers need to create more uses for it, and everyday users need to embrace the digital coin as part of the modern global financial system.
Taking a big-picture view, I can see why so many investors in The Motley Fool’s 2024 cryptocurrency investor survey were skeptical about crypto.
But there are plenty of reasons to be optimistic about Bitcoin. The recent launch of the new spot Bitcoin ETFs, for example, could turn out to be a watershed moment in the history of crypto if it leads to mainstream adoption.
Given Bitcoin’s historical track record and its sky-high upside potential, I remain bullish. To paraphrase Winston Churchill, this is not the end for Bitcoin, or even the beginning of the end. It is just the end of the beginning.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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