Is Bitcoin a Millionaire-Maker?
Bitcoin still has the potential to make you a cryptocurrency millionaire, but it’s harder than ever before. There are currently 40,500 Bitcoin millionaires worldwide, according to the latest cryptocurrency wealth report from Henley & Partners. This is more than any other cryptocurrency, but still not enough. So we know that Bitcoin definitely has a track record of creating cryptocurrency millionaires.
But that was then, and this is now. Almost a decade ago, some investors became millionaires by investing in Bitcoin when the trading price was less than $1,000. Today, with Bitcoin trading at around $63,000, the task of becoming a millionaire is much more challenging. Does Bitcoin still have the ability to make you a millionaire?
The Upside Potential of Bitcoin
Of course, the starting point to answer this question is to sift through the various price predictions for Bitcoin on Wall Street and find one that you feel comfortable using. For me, one price estimate I use is the $1 million price prediction from Cathie Wood of Ark Invest.
She made this prediction back in 2022, well before the arrival of a Bitcoin ETF or the recent Bitcoin halving. Since then, she has revised her future price estimates to $1.48 million and then to $3.8 million.
To arrive at the initial $1 million price estimate, Wood examined eight major use cases for Bitcoin and made predictions on the growth rate for each case. For example, she predicts that by 2030, institutional investors will eventually increase their Bitcoin allocation to 6.5%.
Given that Wood made this prediction before the arrival of the new Bitcoin ETF, it actually looks quite smart today. But it is still a relatively aggressive prediction, as current Bitcoin portfolio allocations typically hover around 1%.
The Dollar-Cost Averaging Strategy for Bitcoin
Once you have a price estimate that you feel comfortable with, you can work backwards to figure out how much effort it would take to become a cryptocurrency millionaire.
If you have $63,000 available for investment today, it would require almost no effort. You could simply invest all your money (ouch!) in Bitcoin right now and hold on until 2030, and you might become a cryptocurrency millionaire.
But that’s not practical for two reasons. First, it ignores the concept of portfolio diversification. While you may have $63,000 available for investment now, you might want to spread that money across some diversified investments. Don’t put all your eggs in one basket, right?
Second, you may not have $63,000 available to invest in cryptocurrencies right now unless you are already a member of the top 1%. So you would have to come up with a strategy to build up the “starter” capital of $63,000. And you might need even more than that, as the price of Bitcoin could rise while you scramble to raise the initial $63,000.
One way to address this issue is to use a dollar-cost averaging strategy. In simple terms, you commit to investing a certain amount into Bitcoin each month, like clockwork, until you reach the $63,000 goal. For example, you might decide to invest $1,000 per month over the next five years. This would bring you close to the $63,000 target.
Do You Have the Mindset of a Millionaire?
But unfortunately, being a patient long-term investor is not the only part of becoming a Bitcoin millionaire. This is because Bitcoin is a highly volatile asset, and price fluctuations can be significant. Yes, the value of Bitcoin has the potential to skyrocket, but it can also experience epic portfolio losses.
In fact, Cathie Wood has documented at least four different “Bitcoin drawdowns” where the price of Bitcoin has fallen by over 77%. This includes the nightmare “cryptocurrency winter” of 2022, when the value of Bitcoin plummeted.
So imagine a hypothetical scenario where you have accumulated a Bitcoin holding worth $500,000, on the verge of becoming a millionaire. But what if the next year turns out to be a disaster and you lose 77% (or more) of your investment? Would you go back to square one, trying to piece together the fragments of your shattered Bitcoin reserve?
That being said, I do believe that Bitcoin still has the potential to make you a millionaire. At that time, you might only need small investments of $1,000 or less to become a millionaire. But now, given the rise in Bitcoin prices, you might need $63,000 or more to reach that mythical milestone.
Tags:
ARK
Bitcoin
millionaire
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https://mp.weixin.qq.com/s/cA3SkDiWLEWjYFsD9g6wuw
Disclaimer: The views expressed in all translated articles in BitPush.News represent the views of the authors and do not constitute investment advice.
Original Article Link: https://www.bitpush.news/articles/6757481
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