7 Important Numbers for Bitcoin Owners
11/18/2024 15:49
Bitcoin has a proven track record of delivering market-beating performance, as well as impressive future upside potential.
The recent post-election rally in the price of Bitcoin (CRYPTO: BTC) has been nothing short of jaw-dropping. In a week, Bitcoin soared by nearly 30% to a new all-time high of $93,434. And we might just be getting started, with some analysts now predicting that Bitcoin could be on the path to $200,000 by the end of 2025.
Naturally, all this buzz around Bitcoin is bringing in plenty of new investors who are new to crypto. So, if you're one of these new Bitcoin owners, here's all that you need to know about its exponential growth potential in seven easy-to-understand numbers.
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If you're like many investors, you've probably dreamed of becoming a crypto millionaire one day. At Bitcoin's current price of just under $100,000, you'd need to own approximately 10 bitcoins to become a millionaire.
But don't let sticker shock hold you back. People buy fractional Bitcoins, not whole Bitcoins. That's because each Bitcoin can be divided into 100 million units, known as satoshis (named for the pseudonymous creator of Bitcoin, Satoshi Nakamoto). So, just as a dollar can be divided into 100 cents, a Bitcoin can be divided into 100 million satoshis. And that means you can start investing in Bitcoin with just a few dollars.
For much of this past decade, Bitcoin has been one of the best-performing assets on the planet. This year is no different, with Bitcoin soaring in value by more than 100%. Last year, Bitcoin was up more than 150%.
These triple-digit returns are not even out of the ordinary. Consider that, in the period from 2011-2021, Bitcoin delivered annualized returns of 230%. That was far and away the best performance of any asset class. Tech stocks, for example, only delivered annualized returns of 20% during that time period.
In crypto circles, investors like to talk about the growth potential of different cryptocurrencies in terms of whether they can increase in price by a factor of 10, 100, or even 1,000. The goal, of course, is to find a high-growth cryptocurrency with 1000x upside potential.
A decade ago, Bitcoin had 1000x upside potential. In October 2013, Bitcoin traded for just under $100, and many thought that was an impossibly high price for a digital asset. Today, it trades for close to $100,000. So, if you were prescient enough to have spotted Bitcoin's future growth potential a decade ago, you would have seen a 1,000-fold return on your investment.
One day that will live forever in Bitcoin lore is known as Bitcoin Pizza Day. This was the first recorded time that Bitcoin was used in a transaction to buy physical goods. On May 22, 2010, a computer programmer in Florida agreed to pay 10,000 bitcoins for two large pizzas from Papa John's (NASDAQ: PZZA).
At the time, it seemed like a steal since Bitcoin was practically worthless, and those 10,000 Bitcoins were only worth around $40. Bitcoin had just launched in January 2009, and nobody could have dreamed of how valuable it would eventually become. Today, those 10,000 Bitcoins would be worth close to $1 billion. That's some pretty expensive pizza!
The current price for Bitcoin is within striking distance of $100,000, which would represent yet another all-time-high for Bitcoin. While there is admittedly a certain amount of froth and speculation pushing Bitcoin higher, there is also a longer-term investment thesis at work here. Bitcoin is becoming an increasingly important part of the global financial system, and this growing adoption on a worldwide scale is what is helping to push Bitcoin higher.
Cathie Wood of Ark Invest shocked the investing world in 2022 when she predicted that Bitcoin could soar in value to $1 million by 2030. To support her thesis, she created a very detailed growth model for Bitcoin, showing how it was gaining in user adoption in several very different areas.
For example, Wood correctly predicted that institutional investors would start to make Bitcoin a bigger and bigger part of their overall portfolios. That happened at the start of this year when the new spot Bitcoin ETFs started trading. These ETFs dramatically reduced the complexity and perceived risk of investing in Bitcoin and unlocked a tsunami of new money.
There's one more number that you should know as a Bitcoin owner: zero. That's the number of times you should ever sell your Bitcoin. Part of buying Bitcoin is buying it for the long haul. And to do that, you will need to hold on for dear life (HODL).
That's because volatility is very high for this cryptocurrency, and every few years, it experiences a dramatic drawdown in value. In fact, Cathie Wood of Ark Invest has documented at least five different periods in the history of Bitcoin when it has declined in value by 77% or more. So, be prepared for some turbulence ahead.
At the end of the day, Bitcoin's impressive upside potential sets it apart from other asset classes. While Bitcoin might not hit a price of $1 million for years to come, it is increasingly going mainstream and deserves a closer look for your investment portfolio.
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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.
7 Important Numbers for Bitcoin Owners was originally published by The Motley Fool