Is Bitcoin Really a Billionaire Maker?

There’s no denying that Bitcoin (CRYPTO:BTC) has created its fair share of millionaires over the past decade. As the price of Bitcoin has risen from $10 to over $50,000, the net worth of patient investors who have held onto it has also soared. According to the latest Crypto Wealth Report, there are now at least 40,500 Bitcoin millionaires in the world.

As the price of cryptocurrency continues to rise, expectations of the kind of wealth it can create for investors have also increased, with some even suggesting that it could one day become a billionaire. Are they right?

Bitcoin price predictions

By now, you’ve probably heard some pretty outlandish price predictions for Bitcoin. Many are targeting it to reach $1 million by 2030. But at the Bitcoin 2024 event held in Nashville, Tennessee, in late July, Michael Saylor, the chief executive officer of major Bitcoin holder MicroStrategy (NASDAQ: MSTR), went a step further. He suggested the cryptocurrency could reach as much as $49 million by 2045.

If you’re a long-term investor who’s willing to wait 20 years for a big return, that’s great, but think about what kind of upfront investment you’d need to make to become a billionaire.

For the sake of argument, let’s round Saylor’s $49 million price estimate to $50 million. At that price, you’d need to own 20 bitcoins to become a billionaire in 20 years. With Bitcoin currently priced at just over $50,000, that’s a staggering investment of over $1 million. For most people, that’s a deal-breaker.

The “triple maxi” investment thesis

If you’re not already a millionaire, you’ll need another path to billionaire status. And that brings us to Saylor’s “triple maxi” investment thesis, which he also laid out in his keynote speech at the Bitcoin 2024 event.

This requires unwavering belief in crypto and a willingness to take on large amounts of new debt and break all the rules of traditional investing.

But before we talk about the triple maxi, we need to talk about the “maxi”. Bitcoin maxis (aka maximalists) are investors who believe that all other digital currencies are inferior. For them, the crypto world is the beginning and the end. As a result, they invest only in it.

Image source: Getty Images.

And for most of the last 15 years, they were right. There has never been a better asset with more upside potential and longevity than Bitcoin. It was the world’s best-performing asset from 2011-2021, and it wasn’t even close. Crypto has delivered 230% annualized returns, compared to 20% for the next best asset class, tech stocks.

Becoming a Bitcoin maxi may be enough to get you to millionaire status, but it’s not enough to become a billionaire. To do that, Saylor says you need to be at least “double maxi” — meaning you need to move all your other financial assets into Bitcoin.

At the same time, double maxis are funneling as much of their earnings into Bitcoin as possible. In fact, Saylor says they’ve gone so far as to take on new debt to buy it. Leverage, he says, is key to boosting your Bitcoin returns.

And the triple maxis go one step further: in addition to investing 100% in Bitcoin and borrowing even more with the sole goal of buying more Bitcoin, they are also moving to a tax jurisdiction where crypto gains are tax-free or taxed at a low rate.

Are you ready to break all the rules of investing?

But you can see the problem with that, right? In your pursuit of $1 billion, you have to ignore many of the basic rules of investing, like portfolio diversification.

With a diversified approach, you spread your investments across several different asset classes, each with a different risk-reward profile. That way, when financial markets crash, you don’t have all your eggs in one basket.

Also, traditional rules of investing require you to eliminate personal debt so that you don’t have to deal with monthly payments. Pay off your student loan debt, credit cards, and mortgage. However, if you’re a triple maxi, you’re taking on new debt in the hopes that Bitcoin’s price will rise aggressively.

Even if the super bullish $50 million Bitcoin price predictions come true and you hit a triple max, the digital currency may not have the potential to create billionaires. I’m still very bullish on the long term, but I’m not going to break all the rules of investing trying to find it.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in Bitcoin and recommends Bitcoin. The Motley Fool has a disclosure policy.

Is Bitcoin Really a Billionaire Maker? was originally published by The Motley Fool