Turning a tiny initial stake into a hearty fortune is the oldest fantasy in investing, and Bitcoin (BTC 1.91%) has done quite a bit to keep that fantasy alive. Over the past decade, the cryptocurrency delivered a compound annual growth rate (CAGR) exceeding 67%, dramatically exceeding both stocks and gold.
But could it turn a $1,000 investment made today into $1 million by 2045, nearly 20 years from now? Let’s see what the numbers say.
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The math is less generous than it looks
To project how Bitcoin could do over the next 19 years, it won’t work to use its historical CAGR; the odds of it continuing to grow at that very fast pace are close to nil, even if everything in its investment thesis plays out.
Using Bitcoin’s power-law model, a logarithmic regression of its price history, a 30% CAGR is a “conservative” forward trajectory, at least in the eyes of some Bitcoin analysts and investors. Even so, $1,000 compounding at 30% for 19 years grows to reach a value of about $146,000 — an absolutely spectacular run if it happens, but far short of seven figures.
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To hit $1 million by 2045, you’d need a sustained 44% CAGR, which is a rate no liquid asset has maintained across two consecutive decades.
And again, a 30% CAGR is itself highly optimistic. A few more grounded projections, as modeled by Morgan Stanley recently, mapped out a few scenarios wherein the 10-year annualized return was estimated to be from about 3% to 10%. At 10%, $1,000 over 19 years becomes roughly $6,100, which is essentially the same as the expected return over buying a market-tracking index fund and holding it for the same duration.
Steady accumulation could rewrite the story
If a single $1,000 buy won’t reach $1 million even with a lot of holding, what might work instead?
Persistent purchasing with a long-term mindset could do the trick, even if it’ll likely require far more capital than $1,000.
Dollar-cost averaging, buying a fixed dollar amount of the coin at regular intervals, changes the calculus for the better, though it still requires plenty of patience. With a hypothetical 30% CAGR, starting from zero and contributing $200 per month for 19 years could theoretically grow past $1.1 million.
In truth, even this slower approach is not guaranteed. Anyone planning to hold Bitcoin for nearly two decades needs a lot of fortitude to ride out years where the asset is deeply underwater. And it wouldn’t be a wise financial decision to set down this path without diversifying your portfolio and ensuring that your allocation to Bitcoin doesn’t get out of control.
But none of that prevents you from accumulating Bitcoin and getting some upside. After all, it could still be a great investment even if it doesn’t achieve the classic investment fantasy.