That’s a mistake, because stocks are valued based on their future performance, not their past performance. And this is where Bitcoin’s upside potential is so impressive. Simply put, the further into the future you extend your price predictions, the more attractive Bitcoin looks.
Investment firm Bernstein, for example, believes bitcoin’s price could more than triple to $200,000 by the end of 2025. A growing number of Silicon Valley tech leaders believe the cryptocurrency’s price could hit $1 million within the next few years, with Ark Invest’s Cathie Wood believing bitcoin’s price could reach $3.8 million by 2030.
But these price predictions pale in comparison to those of Michael Saylor, founder and chairman of MicroStrategy, who believes Bitcoin could hit $13 million by 2045. He believes Bitcoin is the future of money and has the potential to replace the US dollar. Some may disagree, but that’s what creates the market.
Considering Bitcoin’s current price of around $60,000, a price of $13 million would represent a gain of over 21,000%. Are any Wall Street analysts making the same prediction for Nvidia?
Risk and Volatility
Of course, Bitcoin’s enormous upside potential comes with big risks. The U.S. government could ban Bitcoin, as several other governments have done. It could make it very difficult to hold Bitcoin long-term if U.S. tax authorities require investors to pay taxes on unrealized capital gains. Also, there could be an immediate existential risk if the Securities and Exchange Commission takes action to classify Bitcoin as a security.
The story continues
But Nvidia is not without its own risks. The AI boom could become a massive speculative bubble that some are already comparing to the dot-com bubble of the 2000s. And Nvidia is not without competitors, any of which could steal market share. Nvidia may never be able to satisfy Wall Street’s insatiable appetite for growth.
So a better way to directly compare Bitcoin to Nvidia would be to compare their risk-adjusted returns. In other words, how much risk are you willing to take on to get all that upside potential? In the best case scenario, you’d choose the investment that gives you the highest possible upside while incurring as little risk as possible.
And here’s where it gets really interesting: on a risk-adjusted basis, Bitcoin may not be as risky as you think. According to Fidelity Investments, at the start of 2024, Bitcoin had the highest Sharpe ratio (which measures risk-adjusted returns) of any asset class over the past five years. This means that even though you’re taking a lot of risk with Bitcoin, you’re also reaping the rewards.
Bitcoin or Nvidia?
If I had to choose between Bitcoin and Nvidia, I would choose Bitcoin. It’s hard to ignore the fact that Bitcoin has long been one of the best-performing assets in the world. And thanks to the launch of a new spot Bitcoin exchange-traded fund (ETF) in January, it seems like Bitcoin is finally joining the mainstream. You no longer have to be a cryptocurrency enthusiast to buy Bitcoin; it’s as easy as buying your favorite tech stock.
While a $1 million Bitcoin price prediction may seem a bit far-fetched to many, it certainly shows just how much upside the cryptocurrency has in store — more so than any tech stock over almost any time period.
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Dominic Basulto invests in Bitcoin. The Motley Fool invests in and recommends Bitcoin, Goldman Sachs Group, and Nvidia. The Motley Fool has a disclosure policy.
Bitcoin Still Has More Upside Than Any Tech Stock, Including Nvidia This was originally published by The Motley Fool.
