For investors looking to accelerate their retirement, investing in stocks is a necessary effort. The S&P500 has grown about 10% per year on average over the past century, which would indicate that it has the ability to turn seemingly small sums of money into massive wealth given enough time.
But the rise of cryptocurrencies — notably Bitcoin (BTC 0.76%) — introduced another powerful tool to the investor’s kit. Indeed, even taking into account the increased risk, the potential to achieve life-changing returns more quickly is certainly a possibility now.
Here’s Why Bitcoin Could Help You take early retirement.
The possibility of high returns
The main areas of focus for anyone considering retirement should start with trying to increase their income, as well as setting aside a significant amount of money in the form of long-term savings. These are important things that someone actually has control over, and they have a profound impact on your financial well-being.
The next point of attention should be to try to get satisfactory returns. And it differs for everyone because it’s based on the number of years until retirement, risk tolerance, and desired lifestyle, among other factors. Talking to a financial advisor about your goals will help you determine what comes back on target.
Bitcoin can certainly increase a portfolio’s ability to produce exceptional returns. Since April 2013 (the first data provided by coinmarketcap.com), the digital coin has generated a monster return of almost 12,000%, easily crushing the S&P 500 and the Nasdaq Composite Index. The rally was extremely volatile. And that is evident now, as the cryptocurrency is down 65% in 2022 at the time of writing. Returns have always been excellent over several years, but investors must be able to withstand the inevitable ups and downs.
Trying to find ways to increase the potential returns of your portfolio, while keeping the risk at a level that suits you, is the name of the game for reaching retirement as soon as possible.
The most realistic use of Bitcoin centers on it continuing to become a larger store of value across the globe. And with that framework in mind, I think ARK Invest provides an overall picture of its expected future value.
According to the growth-focused investment firm run by Cathie Wood, Bitcoin may be more accepted as an asset to buy and hold by central banks (for 1% of their asset reserves), high net worth individuals (for 5% of their assets), institutional investors (2.5% of assets) and companies (5% of cash on the balance sheet). Moreover, its value could slowly increase to reach 50% of the total world value of gold. Considering ARK Invest’s projections based on these factors, the price of a single Bitcoin could exceed $1 million by 2030, from about $16,000 today.
This rules out potential gains from using Bitcoin for remittances, as a currency in emerging markets, and as a settlement network — other functions, according to Ark Invest, that Bitcoin could serve. I’m only focusing on Bitcoin as a store of value in this analysis, not as a transactional tool, which is a more uncertain idea and probably much further down the road.
A price target of $1 million implies a gain of more than 62 times by the end of the decade, which means that a $100,000 investment in Bitcoin today would be worth around $6.2 million in 2030. And at this level, Bitcoin market capitalization would be a whopping $21 trillion.
Compared to traditional stocks, which represent real businesses that generate income and cash flow, it is not really easy to do valuation analysis on Bitcoin. So, to be clear, anyone’s guess is whether or not Bitcoin can achieve this lofty goal by 2030 – or not at all. But you see how gigantic the upside potential could be.
And I’m pretty sure you’d be hard-pressed to find a stock that has the potential to beat Bitcoin’s comeback over the next decade based on the scenario I just discussed. Therefore, a small allocation to this top digital asset could energize your portfolio and put you on the fast track to retirement.