There is a good reason why the myth of the crypto millionaire exists. According to the latest Crypto Wealth Report, there are more than 88,000 people worldwide who have become crypto millionaires.
And (perhaps no surprise here) the only cryptocurrency responsible for 40,500 of those millionaires Bitcoin (BTC 0.62%). While there is certainly no guarantee that investing in Bitcoin will put you on the path to millionaire status, this cryptocurrency has several characteristics that make it ideal for building long-term wealth. Let's take a closer look.
1. Global acceptance and growing utility
Many people view Bitcoin as just a form of digital gold. However, there are several other uses for it beyond simply functioning as a long-term store of value, similar to gold itself. They are all based on the original idea of a peer-to-peer electronic cash system, as first proposed by the pseudonymous Satoshi Nakamoto in the original Bitcoin white paper.
In its Big Ideas 2023 report, Ark Invest outlines eight possible uses for Bitcoin. If you add them all up and make some projections about future growth, you can come up with a very high potential valuation for Bitcoin. For example, in the bull case scenario, Ark Invest's Cathie Wood says the token could be worth up to $1.48 million by 2030.
2. Bitcoin as a new asset class
When thinking about how to build an investment portfolio, two of the most popular asset classes are stocks and fixed income (i.e. stocks and bonds). But there are also so-called alternative asset classes such as real estate, raw materials and private equity. And now, according to a growing number of influential voices on Wall Street, there is Bitcoin too.
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If Bitcoin is a unique asset class with a very distinct risk-reward profile, it becomes much more attractive to institutional investors. In order to achieve an optimal portfolio mix, you now have to take this into account. And that means they could choose to invest between 1% and 2.5% of their portfolio in cryptocurrencies.
For example, in its base case, Ark Invest uses the 1% number, while in its bull case the company uses the 2.5% number.
Given that these institutional investors manage trillions of dollars in assets, even 1% of their total assets under management could be a huge number. For example, BlackRock (BLK -1.52%) manages approximately $9 trillion in assets. So 1% of that would mean potentially billions of dollars flowing into Bitcoin.
These investors will most likely not invest directly in the digital coin. Instead, they will invest through spot Bitcoin exchange-traded funds (ETFs), which reflect and track the performance of Bitcoin.
The launch of the first spot Bitcoin ETF is now expected in the first quarter of 2024. Some are already predicting that these new ETFs could lead to a huge inflow of new money into Bitcoin. And of course that will drive up the price over time.
3. The 100-year plan
In a world driven by quarterly financial results and annual returns, how many companies have implemented a 100-year strategy? Few if any. Of all companies in the S&P 500, only a small number have been around for 100 years or more. These are among the oldest and most respected companies in America.
But did you know that Bitcoin has a 100-year plan? Everything is determined by a computer algorithm, but the speed of creating new Bitcoins is controlled very carefully. Every four years, the rate of new token creation drops by half, part of a process called halving.
Given the current circulating supply of 19.5 million Bitcoins and the maximum lifetime supply of 21 million Bitcoins, one can assume that there will be around 30 more halving cycles. The last Bitcoin will be mined sometime around 2140. That's more than 100 years from now!
All of this contributes to making Bitcoin a fantastic buy-and-hold asset that you can hold onto for literally your entire life. This perceived long-term stability is one of the reasons why Bitcoin is so attractive to crypto investors.
How likely are you to become a millionaire?
Just keep your hopes of becoming a crypto millionaire in check. Yes, there are reportedly 40,500 Bitcoin millionaires. But there are also 1 million crypto wallets worldwide that contain at least one whole Bitcoin. Based on these numbers alone, your chance of becoming a millionaire (even if you decide to invest $43,000 for a whole Bitcoin today) could be less than 5%.
But these 5% are a special breed. These investors recognized an opportunity early on. They held on to this investment despite bear markets and unpredictable sell-offs. And they realized that Bitcoin could become an important part of a diversified portfolio. If you're looking for a cryptocurrency to put you on the path to millionaire status, it's Bitcoin.
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