Wrong. And that’s because stocks aren’t valued based on how they’ve performed in the past, but rather how they’ll perform in the future. And this is where Bitcoin’s upside potential is so impressive. Simply put, the further you extend your price prediction into the future, the better Bitcoin looks.
For example investment company Bernstein thinks Bitcoin could more than triple in value, reaching $200,000 by the end of 2025. A growing number of Silicon Valley tech leaders think Bitcoin could hit $1 million within the next few years, and Ark Invest’s Cathie Wood thinks Bitcoin could hit $3.8 million by 2030.
But all of these price predictions pale in comparison to those of Michael Saylor, founder and executive chairman of MicroStrategy. He thinks Bitcoin could be worth $13 million by 2045. He believes Bitcoin is the future of money and has the potential to replace the US dollar. You may not agree, but that’s what creates markets.
Based on Bitcoin’s current price of around $60,000, a price of $13 million represents a gain of over 21,000%. Can you find any Wall Street analysts willing to make the same prediction for Nvidia?
Risk and volatility
Of course, Bitcoin’s enormous upside potential comes with significant risks. The U.S. government could ban Bitcoin, as some other governments have done. U.S. tax authorities could make it extremely burdensome to hold Bitcoin long-term by requiring investors to pay taxes on unrealized capital gains. And the Securities and Exchange Commission could classify Bitcoin as a security, which would create an immediate existential risk.
But it’s not like Nvidia doesn’t come with its own risks. The AI boom could turn into a massive speculative bubble, with some already comparing it to the dot-com bubble of the 2000s. And it’s not like Nvidia doesn’t have competitive rivals, all of which could steal market share. Nvidia may never be able to satisfy Wall Street’s insatiable appetite for growth.
A better way to compare Bitcoin and Nvidia head-to-head is probably a comparison of risk-adjusted returns. In other words, how much risk are you taking to get all that upside potential? In the best of all worlds, you would choose the investment that offers the most possible upside potential while taking the least possible risk.
And here’s where it gets really interesting, because on a risk-adjusted basis, Bitcoin might not be as risky as you think. According to Fidelity Investments, as of early 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 huge risk with Bitcoin, you’re still getting paid for it.
Bitcoin or Nvidia?
If I had to choose between Bitcoin and Nvidia, I’d choose Bitcoin. It’s hard to ignore the fact that it’s been one of the best-performing assets in the world for so long. And thanks to the launch of new spot Bitcoin exchange-traded funds (ETFs) in January, Bitcoin is finally starting to go mainstream. You don’t have to be a crypto enthusiast to buy Bitcoin anymore; you can buy it as easily as you buy your favorite tech stocks.
And while Bitcoin’s million-dollar price predictions may sound a bit outlandish to many, they certainly show just how much upside potential this cryptocurrency has. Over almost any time horizon, it has more upside potential than any other tech stock.
Should You Invest $1,000 in Bitcoin Now?
Before buying Bitcoin stocks, you should consider the following:
The Motley Fool Stock Advisor team of analysts has just identified what they think is the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The 10 stocks that made the cut could deliver monster returns in the years to come.
Think about when Nvidia made this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $722,320!*
Stock Advisor offers investors an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. The Stock Advisor has service more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns as of September 16, 2024
Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin, Goldman Sachs Group, and Nvidia. The Motley Fool has a disclosure policy.
Bitcoin Still Has More Upside Potential Than Any Tech Stock, And That Includes Nvidia was originally published by The Motley Fool
