Investors should keep it simple and focus on the most developed cryptocurrency.
I’d expect that it would take investors a long time to try to find assets that performed better than Bitcoin (BTC 0.07%) has. In the past decade, the world’s most valuable cryptocurrency has skyrocketed 121-fold. If you’d invested $1,000 10 years ago, you’d have a jaw-dropping $121,000 today.
Here’s why Bitcoin, even after its monumental performance in the past decade, is still the ultimate cryptocurrency to buy with $1,000 in August.
Bitcoin is a game-changing concept
When the Bitcoin whitepaper was released in October 2008, it introduced a method for two parties to directly send money to each other digitally without the use of an intermediary. This just wasn’t possible before.
The fact that Bitcoin is decentralized and borderless with no single entity in control is a game-changing breakthrough in and of itself. But what’s truly special is the fixed supply cap. There will only ever be 21 million coins in circulation, thanks to a pre-determined inflation rate that’s etched into the software. Plus, Bitcoin has never been hacked, which might make it the most secure computer network on Earth.
Bitcoin’s characteristics are definitely compelling. But they stand out even more if we view the blockchain network in relation to the current financial system.
Look at the U.S., the world’s dominant economy. Despite this leading position, the government continues to operate with a massive fiscal deficit that is likely never going to change. That has resulted in a federal debt burden of $35 trillion. Consequently, the money supply has also climbed rapidly in the past 20 years, with no end in sight.
This unfavorable situation isn’t unique to the U.S. And it leads to the constant debasement of fiat currencies. This alone shows why Bitcoin is potentially a better financial asset.
Bitcoin’s long-term upside
I’ve seen some very optimistic scenarios for Bitcoin’s ultimate upside. Cathie Wood of Ark Invest believes in her firm’s bull-case outlook that Bitcoin’s price will rise to $3.8 million by 2030 — provided that the crypto commands a higher allocation in investment portfolios, whether that’s for individuals, institutions, central banks, or corporations and their balance sheets.
I can’t predict the future, but I think this lofty projection isn’t probable. Going forward, it’s reasonable to expect that Bitcoin’s returns won’t be nearly as wonderful as they were in the past. That’s just the nature of an asset that starts to mature.
A more apt comparison pits Bitcoin side-by-side against gold. Both are viewed as commodities, with one being purely digital and one being physical. Gold has been used as a store of value for thousands of years and is still perceived as a safe-haven asset today. Bitcoin aims to be something similar.
In my opinion, the top cryptocurrency possesses more favorable traits than gold. Because Bitcoin is digital, it’s more portable, verifiable, and divisible.
Bitcoin is also easier to transact with, as there are services set up to facilitate its use. Try using gold to pay for anything. That’s not practical. As the world continues to move toward a more tech-enabled and connected future, Bitcoin is poised to become a more important part of the global economy.
Assuming that Bitcoin’s market cap of $1.2 trillion one day matches gold’s market cap of $16.9 trillion, there is 1,300% upside. It’s not unreasonable to expect that Bitcoin can eventually exceed the value of the precious metal.
Of course, the only way for any investor to even have the chance to capture this potential upside is to be able to handle the inevitable volatility and have a very long-term mindset. Investing $1,000 in Bitcoin in August and holding for a decade or beyond could prove to be a very lucrative financial decision.
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.