How Bitcoin Could Help You Retire a Millionaire

Key Points

• In the period from 2013 to 2024, Bitcoin delivered 1,000-fold returns to investors.

• Given those returns, an initial investment of $1,000 would be worth more than $1 million today.

• One leading investor now expects Bitcoin to hit a price of $21 million by the year 2046.

• 10 stocks we like better than Bitcoin ›

Bitcoin (CRYPTO: BTC) is up 25% this year (as of Sept. 18). That's the good news. The bad news is that it is arguably having its worst bull-market year ever.

For nearly a decade, Bitcoin investors have been spoiled by triple-digit percentage returns on a regular basis. But that doesn't mean it no longer has the ability to mint new millionaires. As long as you're willing to buy and hold for the long haul, it could help you retire as a millionaire.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

The "modern-day gold"

In a recent CNBC interview, Eric Trump, the son of President Donald Trump, suggested that Bitcoin has become "the truly greatest asset of our time." Granted, he could be biased, given the Trump family's expanding crypto empire, but he makes a strong case for why corporations, institutions, sovereign nations, and individual investors should be piling into Bitcoin.

Image source: Getty Images.

You can't find another asset with the risk-return profile of Bitcoin. It delivers incredibly high annual returns on a regular basis, yet offers plenty of downside protection as well. Some even refer to as modern-day gold, due to its hedging potential.

Historically, it has been highly correlated with any major asset class. It can zig when other assets zag, so it has the potential to soar in value, even amid a backdrop of economic weakness.

Last September, investment manager BlackRock hinted at that as well. In a research report entitled Bitcoin: A Unique Diversifier, it outlined the unique risk-reward profile of Bitcoin, and why the crypto has the ability to provide strong diversification benefits. The company, which is the world's largest asset manager, also warned against using a typical risk-on/risk-off framework when evaluating the digital token.

Of course, it's not as if Bitcoin's price only goes up. The crypto typically follows a four-year cycle that is punctuated by periods of boom and bust. In 2018 and 2022, for example, it shed much of its value. All told, it has suffered through at least five distinct periods of decline during which it lost 75% or more of its value.

Millionaire-maker math

The math behind becoming a crypto millionaire is surprisingly simple: Invest $1,000 in a cryptocurrency with 1,000-fold upside, wait a few years, and you have your $1 million. While $1,000 is a healthy up-front investment, it's accessible enough to any investor serious about building a nest egg for the future.

The hard part, of course, is finding the cryptocurrency with that much potential upside. Nearly a decade ago, Bitcoin had that. In 2013, it was still trading for less than $100. But then it went on an epic decade-long run that saw its price rise from $100 to more than $100,000.

Does Bitcoin still have 1,000-fold upside potential?

At a current price of $117,000, a $1,000 investment inBitcoin would need to go on another 1,000-fold run to mint new millionaires. But that implies a future price tag of $117 million per coin, so this isn't a realistic scenario.

However, Michael Saylor, founder of Bitcoin treasury company Strategy, has suggested that it could hit a price of $21 million within 21 years. As the pace of institutional adoption grows, and as more investors add the crypto to their diversified portfolios, demand will grow in the future, leading to a higher price.

So let's do the math, assuming a $21 million price for Bitcoin. Theoretically, if you were willing to make a $5,000 up-front investment instead of $1,000, you might be able to get there. In 21 years, that $5,000 could be worth $1 million.

That might sound like pie-in-the-sky thinking, but the numbers actually work, provided you're willing to make some heroic assumptions. For example, turning $5,000 into $1 million over 21 years implies annual growth of just under 30%.

By way of comparison, the annual growth rate for Bitcoin during the past five years is nearly 60%. So there's a case to be made that a 30% yearly gain is well within reach of Bitcoin. The boom years will outweigh the bust years by so much, that everything would work out well in the end.

Can you buy and hold Bitcoin?

Just be aware: One of the hardest parts about being a long-term buy-and-hold investor is having the mental fortitude to hold on during the lean years. And Bitcoin is no stranger to those. In 2022, for example, it lost 64% of its value; in 2018, it lost 73%.

If you had so-called diamond hands and held on to your Bitcoin in 2022, then congratulations. But if you were like many investors, you probably started selling part of your holdings as soon as they dipped below a certain price threshold or the media started talking about the onset of crypto winter.

The same scenario might happen again, and it might happen sooner than anyone expects. If it does, then be prepared to buy and HODL (hold on for dear life). If you do, you might one day become a Bitcoin millionaire.

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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.