Just how likely is it that Bitcoin hits a price of $13 million by 2045? You might be surprised.
Over the past decade, Bitcoin (BTC -1.51%) has been one of the best-performing assets in the world. It has skyrocketed in value from just $100 to its current value of $65,000.
The good news is that it may not be too late to invest in Bitcoin’s extraordinary upside potential. According to Michael Saylor, founder and executive chairman of MicroStrategy, Bitcoin is likely to hit a price of $13 million by 2045. Based on today’s prices, that implies further gains of approximately 20,000%. That may sound hard to believe, but there are at least two good reasons why it might actually happen.
Institutional and corporate adoption
One key factor, says Saylor, is the growing institutional and corporate adoption of Bitcoin. On Wall Street, Bitcoin is increasingly viewed as a stand-alone asset class, and new investment products are being created to give investors exposure to it. The new spot Bitcoin exchange-traded funds (ETFs), which launched in January, are perhaps the best example of this.
And that’s just the tip of the iceberg regarding institutional and corporate adoption. For example, Cathie Wood of Ark Invest has outlined eight different use cases for Bitcoin, with all of them helping to bolster global demand for the cryptocurrency. For now, the primary use case has been that Bitcoin is a store of value, with institutional investors and central banks buying it as an alternative to gold.
This demand alone would probably not be enough to propel Bitcoin to extraordinary 20,000% gains. But when you add in the inherent scarcity of Bitcoin, that’s when things get interesting.
The lifetime supply of Bitcoin is capped at 21 million coins, and 19.8 million coins are already in circulation. According to the Bitcoin algorithm, the remaining supply will trickle out over the next 100+ years. When demand is growing rapidly, but supply is not, there is typically upward price pressure.
Bitcoin as “sound money”
A second major factor is Bitcoin’s potential ability to displace the U.S. dollar as the leading reserve currency in the world. Saylor refers to Bitcoin as “sound money,” to differentiate it from fiat currency, which he views as inherently flawed. In the United States, for example, government spending has led to a national debt of $35 trillion. The only way to pay off all that debt is to print more money, further devaluing the U.S. dollar. That approach has worked for now, but at some point, the massive mountain of debt could collapse.
Some investors are already starting to recognize this, and are moving their money out of dollars and into Bitcoin. At some point, this steady flow could turn into a tsunami. In fact, Saylor has now highlighted 2025 as the start of what he refers to as a decade-long “digital gold rush.” That’s when Bitcoin could really go mainstream, and everyone will be looking for the best way to get exposure.
Image source: Getty Images.
It’s easy to be skeptical, but there is some merit to the fact that Saylor has become one of the biggest Bitcoin buyers in the world. He is, as they say, putting his money where his mouth is. His company, MicroStrategy, has become the leading corporate buyer of Bitcoin in the world, with a huge Bitcoin stash now valued at over $16 billion. And he’s so confident in the future of Bitcoin that MicroStrategy is now issuing debt to buy more.
Just how realistic is this price forecast?
Of course, it’s worth stress-testing some of these assumptions. Anytime someone tells you an asset will skyrocket in value by 20,000%, you should be wary. After all, just think of what a price of $13 million for Bitcoin implies. Such a lofty price tag would imply a valuation for Bitcoin of over $250 trillion. That’s a significantly higher valuation than for the entire S&P 500. Quite simply, Bitcoin would become the most important and most valuable asset in the world.
That being said, it’s hard to ignore all the warning signs flashing red right now. Over the past 30 years, we’ve become almost numb to the idea of a massive U.S. government debt collapse. And emerging market nations have distanced themselves from the U.S. dollar. But what if Bitcoin really does become a reserve currency for the rest of the world?
I’m not nearly as bullish on Bitcoin as Michael Saylor, but I do buy into the idea of Bitcoin playing a more important role within the global financial system over the next 20 years. For that reason, I’m buying Bitcoin now and holding for the long haul.