Is Bitcoin Still a Millionaire Maker?

Author: Dominic Basulto Source: Motley Fool Translation: Shan Ouba, Golden Finance

Bitcoin still has the potential to make you a crypto millionaire, but it’s nowhere near as difficult as it once was.

According to Henley & Partners’ latest Crypto Wealth Report, there were 40,500 Bitcoin (BTC) millionaires worldwide at the end of last year. That’s far more than any other cryptocurrency, and no competitor even comes close. So we know Bitcoin does have a track record of creating crypto millionaires.

However, things have changed a lot since the past. Nearly a decade ago, some investors became rich overnight by investing in Bitcoin when it was under $1,000. Today, with Bitcoin hovering around $63,000, it’s much harder to become a millionaire. So, does Bitcoin still have the power to make you a millionaire?

Bitcoin’s Potential Upside

The natural starting point for answering this question is to comb through the various price predictions Wall Street has for Bitcoin and find one you believe is credible. Obviously, the higher the price prediction you use, the more likely you are to become a millionaire in the future.

For me, I’m looking to Ark Invest’s Cathie Wood’s $1 million Bitcoin price prediction. She made her prediction in 2022, before the advent of spot Bitcoin ETFs or the recent Bitcoin halving. Since then, she’s revised this future price prediction up to $1.48 million, and then again to $3.8 million.

To come up with her original $1 million price prediction, Wood looked at eight major use cases for Bitcoin and then made several predictions about the growth rate of each. For example, she predicted that institutional investors would eventually increase their allocation to Bitcoin to 6.5% by 2030.

Considering that Wood made this prediction before spot Bitcoin ETFs were available, it actually seems pretty prescient now. But it’s still relatively aggressive considering that current portfolio allocations to Bitcoin are typically closer to 1%.

Investing in Bitcoin with a Regular Amount

Once you’ve settled on a price prediction that you think is reliable, you need to work backwards to calculate how much effort you’d need to put in to become a crypto millionaire. If you have $63,000 to invest today, it would require almost no effort. You could just put all your money into Bitcoin now (oh my!) and hold on to it, and by 2030 you could be a crypto millionaire.

This approach isn’t realistic, however, for two reasons. First, it ignores the concept of portfolio diversification. Sure, you might have $63,000 to invest now, but you’ll probably want to spread that money across a few diverse investments. Don’t put all your eggs in one basket, right?

Second, unless you’re already in the top 1%, you probably don’t have $63,000 to invest in crypto right now. So you’ll first need to develop a strategy to amass a $63,000 “starting capital.” And you’ll probably need more, since the price of Bitcoin could rise while you’re working to get that initial capital together.

One ​​way to get around this is to adopt a regular investment strategy. In simple terms, you simply commit to investing a fixed amount of money into Bitcoin on a regular basis each month until you reach your $63,000 goal. For example, you might decide to invest $1,000 per month for the next five years. By the end of the five-year period, you will be close to your $63,000 goal.

Do You Have the Mindset to Become a Millionaire?

But, unfortunately, becoming a Bitcoin millionaire requires more than just patience and a long-term investment mindset. This is because Bitcoin is a very volatile asset, and price swings can be very dramatic. Yes, Bitcoin has the potential to skyrocket in price, but it can also experience some very disappointing declines.

In fact, Cathie Wood has documented at least four "Bitcoin pullbacks" where the price of Bitcoin fell by more than 77%. This included the crypto winter of 2022, when the price of Bitcoin plummeted.

So imagine this hypothetical scenario: You finally accumulated $500,000 in Bitcoin holdings and are on your way to becoming a millionaire. But what if next year goes bad and you lose 77% (or more) of your investment? You'll be back to square one, trying to pick up your shattered Bitcoin dream again.

That being said, I think Bitcoin still has the potential to create millionaires. But the barriers to participation have clearly increased since Bitcoin was first launched in 2009. Back then, you could become a millionaire with a small investment of $1,000 or less. But now, given the rise in Bitcoin prices, you might need $63,000 or more to reach that mythical milestone.