Is Bitcoin a Millionaire Maker?

Through 15 years of history, bitcoin (BTC 5.10%) It has created many millionaires. In fact, data from blockchain analytics platform Glassnode shows about 115,000 wallet addresses with current balances of $1 million or more.

But what are your chances of one day joining this select group? If you’re a patient, long-term investor, the answer may surprise you.

Image source: Getty Images.

A quick look at the price of Bitcoin over the past few years shows that the most explosive rises have occurred early on. From 2009 to 2012, the world’s first cryptocurrency grew by 710,000%, from less than a tenth of a penny to more than $5. With Bitcoin trading at around $65,000 today, an investment of just $75 would have made you a millionaire when it was worth about $5.

It may sound surprising, but even if the days of trading for less than $100, let alone $10,000, are behind us, there are still plenty of opportunities for the world’s first cryptocurrency to create millionaires. There are complex simulations and complex theories that could be useful in capturing Bitcoin’s future millionaire power, but some simple math could also do the trick.

half-life phenomenon

Bitcoin’s performance is often analyzed in relation to halving. These halvings, which occur approximately every four years, serve as an easy landmark to halve the inflation rate and break Bitcoin’s existence into a natural cycle.

One notable observation made by Bitcoin analyst Willy Woo is that holding Bitcoin for at least one halving cycle, or roughly four years, has never resulted in a negative return. During this period, Bitcoin returned an average of 30% per year. This means that even if investors buy at the peak of a bull market, they will eventually see a 30% annual return as long as they hold for at least four years.

For those considering #Bitcoin. Remember, you have to keep it for four years. No matter how bad the timing is, I’ve never returned less than 30% per year on a four-year investment.

BTC: down 30-60%, down 75%
SP500: down 10%, down 35%
Real Estate: 10%, 30%+ decline rate
VC funding: 15%-27%, 10-year lock-up pic.twitter.com/UjxCQAHM5l

— Willie Woo (@woonomic) February 22, 2024

Although this is a lower bound scenario, it can be used as a baseline to show investors what it takes to become a Bitcoin millionaire. Assuming a 30% annual return, you would need to invest about $85,500 per year for five years to become a millionaire. After 10 years, this number drops to about $18,250. You only need to invest $1,225 per year for 20 years.

If you expand your perspective beyond four years, your wealth creation potential increases significantly. Considering that the average annual return over Bitcoin’s entire history (not just the four-year halving cycle) has been around 170%, the timeline is accelerated and the amount of investment required is significantly reduced.

The opportunity is today

It is important to acknowledge that past performance does not guarantee future results. However, the fundamental numbers of Bitcoin cannot be changed. Essentially, Bitcoin’s value proposition revolves around one key figure: 21 million.

With a limited supply of 21 million Bitcoins and the continued decline in the Bitcoin issuance rate through halving, supply and demand dynamics will increasingly favor price increases over time.

As an investor, understanding and embracing these basic principles of supply and demand provides a solid foundation for navigating market volatility. Although short-term fluctuations and speculative trends can affect the price, the long-term trajectory of Bitcoin’s value is based on its scarcity and increasing utility. With each halving, the scale tilts towards continued price increases, creating a powerful opportunity for hopeful millionaires.