Is Bitcoin Still a Millionaire Maker?
Bitcoin still has the potential to make you a cryptocurrency millionaire, but the difficulty is far greater than in the past.
According to the latest “Crypto Wealth Report” from Henley & Partners, as of the end of last year, there were 40,500 Bitcoin (BTC) millionaires worldwide. This number far exceeds that of any other cryptocurrency, with no close competitors. Therefore, we know that Bitcoin indeed has a history of creating cryptocurrency millionaires.
However, the glory days are over, and the situation has changed significantly. Nearly a decade ago, some investors became overnight millionaires by investing when Bitcoin was priced below $1,000. Today, with Bitcoin’s price hovering around $63,000, the difficulty of becoming a millionaire is much greater. So, does Bitcoin still have the capability to make you a millionaire?
Bitcoin’s Potential for Appreciation
To answer this question, we naturally start by examining various price predictions for Bitcoin from Wall Street and find one you consider credible. Clearly, the higher the price prediction you use, the greater your potential to become a millionaire in the future.
One reference is Cathie Wood from Ark Invest, who predicted a Bitcoin price of $1 million. She made this prediction in 2022, before the advent of the spot Bitcoin ETF or the recent Bitcoin halving. Since then, she has raised this future price prediction to $1.48 million and then to $3.8 million.
To arrive at her initial $1 million price prediction, Wood examined eight major use cases for Bitcoin and then made several growth rate predictions for each use case. For example, she predicted that by 2030, institutional investors would ultimately increase their allocation to Bitcoin to 6.5%.
Considering Wood made this prediction before the listing of the spot Bitcoin ETF, it now seems quite prescient. But given that the current allocation to Bitcoin in investment portfolios is typically closer to 1%, this prediction remains relatively aggressive.
Adopting a Dollar-Cost Averaging Strategy
Once you have identified a price prediction you believe in, you need to calculate how much effort it will take for you to become a cryptocurrency millionaire. If you have $63,000 to invest today, it requires almost no effort. You simply invest all your funds in Bitcoin now (wow!), and by 2030, you could potentially become a cryptocurrency millionaire.
However, this method is unrealistic for two reasons. First, it ignores the concept of portfolio diversification. While you may have $63,000 to invest now, you might want to spread this money across various diversified investments. Don’t put all your eggs in one basket, right?
Secondly, unless you’re already in the top 1% of the wealthy, you probably don’t have $63,000 to invest in cryptocurrency right now. So, you first need to develop a strategy to accumulate this $63,000 “start-up fund.” And you might need even more because as you strive to gather this initial fund, the price of Bitcoin might rise.
One way to address this issue is by adopting a dollar-cost averaging (DCA) strategy. Simply put, you commit to investing a fixed amount of money in Bitcoin regularly each month until you reach your $63,000 goal. For example, you might decide to invest $1,000 monthly for the next five years. By the end of the five-year period, you will be close to your $63,000 target.
Do You Have the Mindset to Become a Millionaire?
However, unfortunately, becoming a Bitcoin millionaire requires more than just patience and a long-term investment mindset. This is because Bitcoin is a highly volatile asset with price swings that can be very dramatic. Yes, Bitcoin has the potential for substantial price increases, but it can also experience significant disappointing downturns.
In fact, Cathie Wood documented at least four instances of Bitcoin price drops exceeding 77%—referred to as “Bitcoin retracements.” These include the crypto winter of 2022 when Bitcoin’s price plummeted.
So, imagine this hypothetical scenario: you eventually accumulate $500,000 worth of Bitcoin, progressing towards millionaire status. But what if you face a severe downturn next year and lose 77% (or more) of your investment? You’ll be back to square one, trying to pick up the pieces of your shattered Bitcoin dreams.
That said, I believe Bitcoin still has the potential to create millionaires. But the entry threshold has clearly risen since Bitcoin’s launch in 2009. Back then, you might have become a millionaire with a modest investment of $1,000 or less. But now, given Bitcoin’s price increase, you might need $63,000 or more to reach this mythical milestone.