As Bitcoin’s price forecasts keep moving upward, so do expectations about its ability to create generational wealth.
There’s no denying that Bitcoin (BTC 1.07%) has minted its share of millionaires over the past decade. As the price of Bitcoin has soared from less than $10 to over $50,000, so has the net worth of patient investors who have held on to it. According to the most recent Crypto Wealth Report, there are now at least 40,500 Bitcoin millionaires in the world.
As the crypto’s price has continued to soar, so have expectations about the type of wealth it might be able to create for investors. Some have even suggested that it might be a billionaire maker one day. Are they right?
Bitcoin price forecasts
By now, you have probably heard some pretty outlandish price forecasts for Bitcoin. Many of them center around hitting $1 million by the year 2030. But at the Bitcoin 2024 event in Nashville, Tennessee, at the end of July, Michael Saylor, executive chairman of major Bitcoin holder MicroStrategy (MSTR -0.46%), went one step further. He suggested that the crypto could soar as high as $49 million by the year 2045.
That’s great if you’re a long-term investor willing to wait 20 years for a big payoff, but just think about the type of upfront investment that would be required to become a billionaire.
For the sake of argument, let’s round up Saylor’s $49 million price forecast to $50 million. At that price, you would need to own 20 bitcoins to become a billionaire 20 years from now. Given Bitcoin’s current price of just over $50,000, that works out to a staggering investment of more than $1 million. For most people, that’s a deal-breaker.
The “triple maxi” investment thesis
If you’re not already a millionaire, then you’ll need another path to billionaire status. And that leads us to the “triple maxi” investment thesis, which Saylor also laid out during his keynote address at the Bitcoin 2024 event.
It involves unswerving faith in the crypto, and a willingness to take on massive amounts of new debt and break all the rules of traditional investing.
Before we talk about triple maxi, though, we need to talk about “maxi.” Bitcoin maxis (i.e., maximalists) are investors who believe that all other digital currencies are inferior. For them, it’s the be-all and end-all of the crypto world. As a result, they invest in it exclusively.
Image source: Getty Images.
And for much of the past 15 years, they have been right. There has simply not been a better asset with more upside potential and longevity than Bitcoin. From 2011-2021, it was the best-performing asset in the world, and it wasn’t even close. The crypto delivered annualized returns of 230%, compared to 20% for the next-best asset class, tech stocks.
Becoming a Bitcoin maxi might be enough to put you on the path to millionaire status, but it’s not enough to become a billionaire. To do that, Saylor says, you need to become at least a “double maxi.” — meaning you move all your other financial assets into Bitcoin.
At the same time, double maxis funnel as much of their earnings as they can into Bitcoin. In fact, Saylor says they should even go so far as to take on new debt to buy it. Leverage, he says, is the key to amplifying your Bitcoin returns.
And triple maxis go one step further: Besides going 100% all-in on Bitcoin and taking on even more debt with the sole goal of buying more of it, they move to a tax jurisdiction where their crypto gains are untaxed or lightly taxed.
Are you willing to break all the rules of investing?
But you can see the problem here, right? In pursuit of $1 billion, you would need to ignore many of the basic rules of investing, such as portfolio diversification.
With a diversified approach, you spread out your investments among several different asset classes, each with a different risk-reward profile. That way, when financial markets crater, you don’t have all your eggs in one basket.
Moreover, the traditional rules of investing call for eliminating personal debt so you’re not bogged down with monthly payments. Pay off your student loan debt, your credit cards, and your mortgage. But, if you’re a triple maxi, you’re taking on new debt, all in the hope that Bitcoin will appreciate aggressively in price.
Even if super-bullish price forecasts for $50 million Bitcoin come true, and even if you become a triple maxi, the digital coin might not have billionaire-maker potential. I’m still enormously bullish on it over the long haul, but I’m not about to break all the rules of investing trying to find out.