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Can Bitcoin Really Make You a Millionaire?
Bitcoin has already made many millionaires and you could be one too.
RJ Fulton | The heterogeneous madman
Over its 15-year history, Bitcoin (CRYPTO: BTC) has created many millionaires. In fact, data from blockchain analytics platform Glassnode shows around 115,000 wallet addresses with a balance of more than $1 million today.
But what are the chances that you might one day join this select group? For the patient, long-term investor, the answer may surprise you.
A quick look at the price of Bitcoin over the years shows that the most explosive gains were made in its early days. From 2009 to 2012, the world’s original cryptocurrency went from less than a tenth of a cent to more than $5, an absurd 710,000% increase. With Bitcoin trading for around $65,000 today, an investment of just $75 when it was worth around $5 would have been enough to make you a millionaire.
As surprising as it may seem, there are still plenty of opportunities for the world’s original cryptocurrency to create millionaires, even though the days of it trading for less than $100, let alone $10,000, are probably over. There are complex simulations and intricate theories that can be helpful in capturing Bitcoin’s future million-dollar capabilities, but some simple calculations can work too.
The halving phenomenon
Bitcoin’s performance is often analyzed in relation to its halvings. These halvings, which occur approximately every four years, reduce the rate of inflation by half and serve as simple benchmarks for breaking Bitcoin’s existence into natural cycles.
A notable observation made by Bitcoin analyst Willy Woo is that holding Bitcoin for at least one halving cycle, or approximately four years, has never produced a negative return. During this period, Bitcoin showed an average annualized return of 30%. In other words, even if investors bought at the height of a bull market, as long as they held for at least four years, they would ultimately see a 30% annualized return.
For those considering #Bitcoin. Remember to keep for 4 years. It never returns below 30% annualized for a 4 year investment, no matter how wrong the timing is…BTC: 30-60%, withdrawals 75%SP500: 10%, withdrawals 35%Real estate: 10%, withdrawals 30%+VC funds: 15%-27%, 10 year lock
While this is a lower bound scenario, we can use it as a basis to show what it takes for investors to become a Bitcoin millionaire. Assuming a 30% annualized return, to reach millionaire status you would need to invest approximately $85,500 per year for five years. Over 10 years, this number drops to about $18,250. Over a 20-year period, you would only need to invest $1,225 per year.
If you expand your view beyond the four-year mark, your wealth creation potential increases dramatically. Considering that Bitcoin’s average annual return over its entire history (not just a four-year halving cycle) is around 170%, the timeline accelerates and the investment amount required decreases significantly.
The opportunity is today
It is critical to recognize that past performance does not guarantee future results. However, the fundamental numbers behind Bitcoin remain immutable. Basically, Bitcoin’s value proposition revolves around one key figure: 21 million.
With a limited supply of 21 million Bitcoin and the continued reduction in the rate of Bitcoin issuance through halvings, supply and demand dynamics increasingly favor price appreciation over time.
As investors, understanding and embracing these fundamental principles of supply and demand provides a solid foundation for navigating market volatility. While short-term fluctuations and speculative trends can influence prices, the long-term trajectory of Bitcoin’s value is anchored by its scarcity and growing utility. With each halving, the scales tip further towards sustained price growth, presenting an attractive opportunity for hopeful millionaires.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
The Motley Fool is a content partner of USA TODAY offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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