This top digital asset could be a big winner in the years ahead.
Bitcoin (BTC 3.22%) has been on a fantastic run over the past year and a half -- it's now up by 299% since the start of 2023. That growth has slowed a bit, as the price of the crypto is down 6% from its all-time high that was reached in March. The current price is roughly $69,400.
For those wondering if now is still a good time to buy the world's most valuable cryptocurrency, I think Bitcoin will reach $150,000 by 2030, delivering an annualized return of 14%.
Diminishing returns
It's important to recognize that Bitcoin's forward returns will likely be much less than its monumental rise to its current level. This asset isn't flying under the radar anymore. So, Bitcoin's appreciation will probably decelerate in the years ahead.
But some prominent figures in the business and investing worlds remain far more bullish than I do. Cathie Wood and her team at Ark Invest think Bitcoin's price could get to $3.8 million by 2030. And Jack Dorsey, the co-founder and CEO of Block, believes Bitcoin will hit $1 million by 2030.
In that context, my prediction of $150,000 by the end of the decade is a more tempered outlook, but it would be a gain that outperforms the S&P 500's average return. Historically, that broad index of 500 of the largest and most profitable U.S. businesses has produced annualized total returns of about 10%.
Rising demand
In my opinion, the key factor that will drive Bitcoin's price is the simple fact that more market participants will own it -- individual and institutional investors, as well as corporations and governments. Rising demand should, in theory, boost Bitcoin's price over the long run.
But why would these market participants want to buy and hold Bitcoin?
Bitcoin's fixed supply cap is probably the most important variable that makes it a compelling asset to own. Only 21 million coins will ever be created, and they are being minted at a pre-determined and regularly shrinking rate -- hard limits that are built into Bitcoin's software.
That's the complete opposite situation of traditional currency and fiscal systems. For example, look at the troubling deficit the U.S. government operates with, leading to an expanding federal debt burden. And we can't forget about the constantly increasing supply of U.S. dollars that causes the purchasing power of the dollar to decline over time.
The growth case for Bitcoin depends largely on people gaining greater familiarity with it. This could take many years. But as we've seen, with a larger number of traditional financial firms painting Bitcoin in a positive light, there should be more buying interest.
Mental preparation
My bullish postulation that Bitcoin will get to $150,000 per coin by the end of the decade is far from a certainty. There's a lot of uncertainty, as is usually the case with newer technologies.
For investors, the best way to approach this asset is by properly sizing your position in it. Don't invest more money in Bitcoin than you're willing to lose. This could result in a person allocating a relatively small portion of a well-diversified portfolio to it -- perhaps 1%.
From a mental and emotional perspective, be ready for that holding to experience lots of volatility. In its fairly brief history, Bitcoin has experienced multiple slumps of more than 50%. While its value might stabilize over time, such dropoffs are still something an investor needs to be prepared for.
If you're looking to buy Bitcoin, be sure to maintain a long-term perspective. The top cryptocurrency is set to continue being a winner over the next several years on the path to $150,000.
Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Block. The Motley Fool has a disclosure policy.
