Bitcoin has been a major disappointment for investors over the last five years, especially when compared with the strong performance of technology stocks during the artificial intelligence boom. Bitcoin has gained only about 40% over the past five years. By comparison, the S&P 500 has gained around 74% over the same period.
This shows that Bitcoin has not been able to keep up with the broader U.S. stock market, even though it is often viewed as an asset with the potential for very high returns. Bitcoin could still rise over the next five years, but investors may have to deal with more uncertainty and weaker returns, according to The Motley Fool.
A recession could give Bitcoin another boost
One possible reason for Bitcoin to rise in the coming years is a U.S. recession or another period of major economic uncertainty. During difficult economic periods, some investors may look for alternative assets to protect their money.
Bitcoin could benefit if investors start treating it as a safe-haven or alternative store of value during financial instability. There is already some evidence that Bitcoin can rise during periods of financial stress. Research from Charles Schwab found that Bitcoin’s value increased during some periods of financial instability.
Bitcoin rose during the 2023 banking crisis
One important example was the 2023 regional banking crisis, when four banks failed, according to research cited by Charles Schwab. Before the bank failures, Bitcoin had been moving lower. But when concerns about the banking system increased, Bitcoin’s price suddenly moved higher as some investors looked for an alternative asset, according to Charles Schwab.
This could support the argument that Bitcoin may attract money during another major financial crisis. However, there is no guarantee that Bitcoin will react in the same way during the next recession or financial crisis, according to The Motley Fool.
Bitcoin’s limited supply could drive demand
Another reason investors remain bullish on Bitcoin is its limited supply. The total number of Bitcoin that can ever exist is capped at 21 million. Around 20 million Bitcoins already exist, according to The Motley Fool. This limited supply is one reason some investors compare Bitcoin with gold, which also has a limited supply and is often used as a store of value.
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The idea is simple: if demand for Bitcoin keeps rising while the supply remains limited, its price could rise. But limited supply alone does not guarantee higher prices. Bitcoin would still need enough demand from investors to push its value higher.
The second major bullish factor could be greater institutional adoption, according to The Motley Fool. This means more banks, investment firms and other large financial companies could start offering or investing in Bitcoin-related products. More institutional involvement could also make it easier for ordinary investors to gain exposure to Bitcoin. That could increase overall demand for the cryptocurrency and potentially push its price higher.
Bitcoin institutional adoption is still in early stages
Amy Oldenburg, Morgan Stanley’s head of digital asset strategy, said Bitcoin is still in the very early stages of institutional adoption, according to The Motley. Oldenburg believes Bitcoin could benefit as more financial companies enter the crypto market. Her view is that greater institutional participation could increase Bitcoin ownership and eventually push its price higher. She has also suggested that Bitcoin could eventually reach $1 million if a major catalyst develops over the coming years. That would be a huge jump from Bitcoin’s current price of about $63,500.
Even if Oldenburg’s $1 million prediction turns out to be wrong, her broader argument about Bitcoin’s long-term potential could still prove correct, according to The Motley Fool. Bitcoin has suffered several extremely sharp price declines since it was launched. Despite those crashes, the cryptocurrency has historically recovered and recorded significant gains again. This history is one reason some investors remain confident that Bitcoin could recover from future downturns.
Bitcoin ETF demand shows growing investor interest
There is also evidence that investors are interested in Bitcoin through traditional financial products. Morgan Stanley’s Bitcoin ETF has attracted more than $400 million in assets, despite launching only four months earlier.
The strong early asset growth could be an early sign that investors are willing to gain Bitcoin exposure through ETFs rather than directly buying and holding the cryptocurrency. If other financial firms continue launching or expanding crypto investment products, demand for Bitcoin could increase further. That could become an important source of support for Bitcoin’s price over the next five years.
The biggest problem for Bitcoin over the next five years could come from AI stocks, according to The Motley Fool. Before the artificial intelligence investment boom, investors looking for potentially huge returns over a relatively short period had fewer choices.
Speculative assets such as Bitcoin and other cryptocurrencies were among the major options for investors willing to take very high risks. But the AI boom has created another path for investors looking for fast and potentially large gains.
AI stocks have already delivered massive returns
Over the past several years, investors have poured money into semiconductor companies and major AI technology companies. Some of these companies have delivered enormous gains. Micron Technology, a major memory-chip company that has benefited from the AI boom, has gained more than 1,200% over the past three years, according to The Motley Fool.
This means investors no longer have to rely only on highly speculative cryptocurrencies when looking for extraordinary returns. AI-related stocks have given investors another way to pursue high growth while owning shares of established businesses.
Also read: Bitcoin is moving differently from tech stocks, but can BTC escape the Fed’s grip?
AI companies have something Bitcoin cannot offer
One major difference between Bitcoin and AI companies is that many AI-related businesses generate real revenue and profits. Companies involved in AI can sell products and services to customers and generate sales. Their earnings can also grow as demand for their products increases.
Bitcoin does not operate like a traditional company and does not generate revenue or earnings from selling products and services. This creates a major difference for investors: AI stocks can potentially offer both business growth and rising share prices, while Bitcoin’s value mainly depends on what investors are willing to pay for the cryptocurrency.
The rapid growth of AI stocks could therefore weaken one of Bitcoin’s biggest attractions, according to The Motley Fool. Investors who previously turned to Bitcoin for huge potential gains now have another group of assets that has already delivered massive returns.
Even periods of volatility in AI stocks have not erased their overall gains. If the AI investment boom continues, investors may continue putting more money into profitable technology companies instead of speculative cryptocurrencies.
Bitcoin could still rise, but its gains may be less impressive
Bitcoin still has several possible catalysts, including recession-driven demand, its limited supply and wider institutional adoption. However, the cryptocurrency may face stronger competition from AI stocks than it did in the past.
If AI investment remains strong over the next five years, Bitcoin may struggle to deliver the kind of returns investors once expected from it, according to The Motley Fool. The key issue is not that Bitcoin has lost all of its potential, but that investors now have more attractive high-growth alternatives.
Bitcoin’s limited supply and growing institutional acceptance could still support its price in the years ahead. A recession or financial crisis could also push some investors toward Bitcoin as an alternative asset. However, the cryptocurrency no longer has the same advantage it once had when investors were searching for assets capable of delivering huge short-term gains.
AI stocks have emerged as a powerful competitor, with companies offering real products, rising revenue, earnings and, in some cases, enormous share-price gains. As long as the AI investment boom continues, Bitcoin could find it harder to deliver exceptional returns over the next five years, according to The Motley Fool.