If you invested $ 100 in Bitcoin in July 2010, here’s how much you would have now

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Over the very long term, no asset class has succeeded better in enriching investors than the stock market. While there have been instances where housing, bonds, oil and other commodities have outperformed stocks in the short term, no other investment vehicle has produced a higher average annual return than stocks. actions.

In the short term, that’s a whole different story.

Since the low of the coronavirus pandemic for stocks in March 2020, the broad-based S&P 500 has returned just over 100%. Meanwhile, the total value of all cryptocurrencies has increased nearly 20-fold, from $ 141 billion to $ 2.8 trillion as of November 12, 2021.

Image source: Getty Images.

Here’s how much $ 100 invested in Bitcoin on the day it debuted now

Much of the buzz in recent months has gone to the dogs, literally. The Shiba Inu coin (CRYPTO: SHIB) has galloped over 10,600,000% since its debut on August 1, 2020. Dogecoin, which also takes its inspiration from the Japanese dog breed Shiba Inu, has won over 27,000 % in six-month installment between early November 2020 and early May 2021.

But potentially lost in this mix is ​​how insane the returns have been for the Blue Chip Bitcoin cryptocurrency (CRYPTO: BTC).

Bitcoin debuted in trading in early July 2010 at a price of $ 0.0008 per token. It’s just eight hundredths of a dime. If we hypothetically assume that there were no transaction fees, a $ 100 investment on its debut day could have bought 125,000 Bitcoin.

As of the late evening of November 12, as of this writing, Bitcoin was going for $ 63,712.34 per token. An initial investment of $ 100 held for just over 11 years and four months gained almost 8,000,000,000% and would now be worth $ 7,964,042,400. In other words, Forbes would include you on its annual list of the richest people in the world.

To put it in another context, Tesla Motors CEO Elon Musk is currently the richest person in the world, with an estimated net worth of $ 281.6 billion. If you had the luck, the stomach, and the means to invest $ 3,550 in Bitcoin on day one, you would be the richest person in the world right now.

Image source: Getty Images.

Here’s how Bitcoin has brought in nearly 8,000,000,000% for its investors since July 2010

You might be wondering how an investment earns almost 8 billion percent in just over 11 years. The answer comes down to a few factors.

Perhaps the biggest catalyst for Bitcoin is the perception of its scarcity. While most cryptocurrencies have a maximum supply of coins (for example, Shiba Inu started with a maximum supply of 1 quadrillion), Bitcoin caps at 21 million tokens. Since Bitcoin is mined and the block rewards associated with validating transactions are halved every four years, the 21 million tokens will not be in circulation until around 2140.

To build on this point, Bitcoin is often seen as an inflation hedge against what has been a free-wheeling Federal Reserve. Since the Great Recession, the US central bank’s balance sheet has grown tremendously, as has the US money supply. The idea here is that as inflation rises and the real value of the US dollar declines, people will flock to Bitcoin, which has an aforementioned fixed supply of 21 million tokens.

There is also great enthusiasm for the growing utility of Bitcoin in the real world. For example, El Salvador became the first country to legalize Bitcoin as a tender on September 7, 2021. Bitcoin is also the most accepted digital currency for businesses around the world.

Unsurprisingly, the world’s largest cryptocurrency by market cap has the largest community, by a mile. More than 76 million people worldwide, including 46 million in the United States, own a single wallet containing Bitcoin, as of August 2021. Keep in mind that these numbers predate El Salvador’s legal tender status. Bitcoin.

Finally, there is continued enthusiasm for future upgrades that will improve the network and hopefully increase adoption. For example, the long-awaited Taproot upgrade took place last weekend. Taproot will strengthen Bitcoin’s privacy, enable complex transactions (ie.

Image source: Getty Images.

Make no mistake: Bitcoin is not a foolproof investment

While Bitcoin has so far been an unstoppable investment that has proven to me wrong, there are plenty of reasons to be skeptical about the future rise (or even the ability to maintain existing gains).

For starters, Bitcoin is not exactly rare. A physical raw material, like gold, is limited to what has already been dug up from the ground and what remains to be mined on Earth. In other words, alchemy cannot be used to make more gold. This is what true scarcity looks like. With Bitcoin, there is no physical shortage. Only written code limits its token limit, and changes can be made if consensus is reached. It’s not real scarcity – it’s the perception of scarcity.

Another concern is that Bitcoin may still fall behind a number of popular cryptocurrencies, even with the Taproot upgrade. Right now, Bitcoin’s transactions are much slower than its peers and cost much more. If companies were looking for a blockchain-based use case that would enhance the existing payment infrastructure, Bitcoin would be at the bottom of the long-term candidate list.

Additionally, Bitcoin is constantly being beaten by dilution. But I am not talking about symbolic inflation. Rather, I’m talking about the hundreds of new coin and blockchain projects introduced every week. While Bitcoin has some pioneering advantages, it is a first-generation technology that might struggle to compete with third-generation blockchain innovation.

The growing ability to trade Bitcoin presents additional challenges. While short selling popular digital currencies is possible on many crypto exchanges, short selling cryptocurrency is rare due to its volatility and sometimes sketchy liquidity. For some tokens, this creates a buying bias. But with the increase in the number of derivative listings for Bitcoin, it allows a lot of money to bet against the world’s largest digital currency. Essentially, as access to Bitcoin increases, so does the ability to sell it short.

Finally, the story is pretty clear: Investors always overestimate how quickly new technologies will be adopted. Every next big trend since the mid-1990s has gone through a bubble phase and finally deflated. This doesn’t mean that blockchain technology won’t play a major role at some point in the future. This is simply to point out that Bitcoin’s big gains are likely to be short-lived, as the company’s move to blockchain is taking longer than expected.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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