Bitcoin (CRYPTO: BTC) is a famously successful investment that has returned more than 10,000% during the past decade. The cryptocurrency is polarizing, though. Legendary investor Warren Buffett has famously said he wouldn't purchase all the world's Bitcoin for $25. On the other hand, some, including MicroStrategy founder Michael Saylor, believe Bitcoin is a crucial component of the global economy.
Saylor recently spoke at the 2024 Bitcoin conference, where he discussed his belief that Bitcoin's price will reach $13 million per coin by 2045. That's roughly 20,000% higher than its current value.
Saylor isn't just talking the talk; he reportedly holds about $1 billion in Bitcoin while his company, MicroStrategy, has accumulated 226,500 bitcoins worth about $13.6 billion.
Does his bold prediction hold water? Should investors buy Bitcoin at today's prices?
Here is what you need to know.
Is Michael Saylor's $13 million Bitcoin target price realistic?
Before getting too excited about Bitcoin's investment potential, investors should understand that Saylor's price target is remarkably optimistic. Saylor is famously a Bitcoin whale, so it shouldn't shock anyone that he would make a bold prediction. But how much merit does this actually have?
Let's do some back-of-the-napkin math.
Even though Bitcoin is priced in dollars, comparing it to gold can help investors understand the valuations of each asset. The Federal Reserve can influence the dollar, but gold, like Bitcoin, is driven more by the free market. Plus, it's valued worldwide, like Bitcoin.
If you take all the gold in the world, an estimated 208,874 metric tonnes, and multiply it by its current spot price per ounce of $2,471, you get a total value of about $16.5 trillion. Now, the total supply of gold increased by 3% percent last year, so let's assume (which could be generous) that this grows the same annually for the next 20 years.
That would mean the global gold supply would be around 377,357 metric tonnes by 2045. The spot price of gold has risen by 519% during the past 20 years. For this example, I'll assume it rises the same amount between now and 2045. The resulting spot price would be $14,058 per ounce. Do the math over again, and the world's gold supply would hypothetically be worth $170.5 trillion in 2045.
Today, Bitcoin's market cap, the total market value of all Bitcoin in circulation, is roughly $1.2 trillion. Raising Bitcoin's price by 20,000% from its current level would push its market cap to more than $241 trillion without even factoring in the increase in supply between now and 2045.
Can Bitcoin displace gold as the underlying asset of the global economy? I won't say it's impossible, but it's a tall task, and that's probably the reality for Bitcoin to grow this large. Investors should probably temper their expectations.
That doesn't mean investors shouldn't be excited
Remember, the great thing about aiming for the moon is that you can fall short and still land among the stars.
Price targets can be high or low, but don't change Bitcoin's trajectory as an anti-inflation asset. Bitcoin isn't new anymore, so it's getting harder to call its investment returns a fluke. Its continually rising value signals that society has actual demand for Bitcoin in the face of the U.S. dollar and other fiat currencies that keep growing weaker as policymakers flood the economy with supply.
Bitcoin is a long way from having true utility in everyday life. Generally speaking, you can't go put gas in your car and pay with Bitcoin. Still, more merchants accept it as payment every year, and corporations and some governments are beginning to accumulate it as a hedge against cash. If this continues, there is no reason Bitcoin's price can't keep rising. It's a digital asset with a fixed supply, priced against a weakening currency (the U.S. dollar).
Is Bitcoin a buy today?
Bitcoin's price has proven quite volatile, so investors should avoid jumping in with both feet at once. If you want to buy Bitcoin, do it like Michael Saylor does:
Buy Bitcoin on a schedule, making regular purchases to slowly build an investment at an average price over the long term. Sometimes, you'll buy when it's up, and other times when it's down. However, you'll average out at a number you'll be happy with if Bitcoin continues on its current trajectory.
Should you invest $1,000 in Bitcoin right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency to Buy Before It Soars 20,000%, According to Michael Saylor was originally published by The Motley Fool