The Millionaire Maker

Bitcoin still has the potential to make you a crypto millionaire. But it’s not as easy as it once was.

According to Henley & Partners’ latest Crypto Wealth Report, there were 40,500 Bitcoin millionaires worldwide at the end of last year. That’s more than any other cryptocurrency, and it’s not even close. So we know Bitcoin definitely has a track record of creating crypto millionaires.

But that was then, and this is now. Nearly a decade ago, when Bitcoin was trading for less than $1,000, some investors became millionaires by investing in it. Today, with Bitcoin trading at around $63,000, the task of becoming a millionaire is much more difficult. Does Bitcoin still have the power to make you a millionaire?

Bitcoin’s Upside Potential

Of course, the starting point for answering this question is to sift through the various Wall Street price predictions for Bitcoin and find one that you feel comfortable using.

For me, one price estimate I use is the $1 million price prediction from Cathie Wood of Ark Invest.

She made this prediction in 2022, well before the arrival of spot Bitcoin ETFs or the recent Bitcoin halving. She has since raised her future price estimate to $1.48 million and then to $3.8 million.

To come up with her initial price estimate of $1 million, Wood looked at eight major use cases for Bitcoin and then made some predictions about the growth rate of each. For example, she expects institutional investors to eventually increase their Bitcoin allocation to 6.5% by 2030.

Given that Wood made this prediction before the arrival of the new spot Bitcoin ETF, it actually looks pretty smart today. But it’s still a relatively aggressive prediction, as Bitcoin portfolio allocations are typically closer to 1% today.

Dollar Cost Averaging for Bitcoin

Once you have a price estimate you’re comfortable with, it’s time to work backwards and calculate how much effort it would take to become a crypto millionaire.

If you have $63,000 to invest today, it would require almost no effort. You could simply invest all of your money (oops!) in Bitcoin right now, hold on to it, and by 2030, you could be a crypto millionaire.

But this is impractical for two reasons. One, it ignores the concept of portfolio diversification. Sure, you may have $63,000 to invest right now, but you probably want to spread that money across a number of diversified investments. You never put all your eggs in one basket, right?

Second, unless you are already a member of the Top 1%, you probably don’t have $63,000 to invest in crypto right now. So you must first develop a strategy to build a $63,000 “starting” fund. And you may need much more than that, because the price of Bitcoin may rise while you are scrambling to raise the initial $63,000.

One way to get around this is to use a dollar-cost averaging strategy. In short, you’ll commit to investing a certain amount into Bitcoin every month, like clockwork, until you reach your $63,000 goal. For example, you might decide to invest $1,000 every month for the next five years. This will get you close to your $63,000 goal.

Do you have a millionaire mindset?

But sadly, being a patient, long-term investor isn’t the only part of becoming a Bitcoin millionaire. That’s because Bitcoin is a very volatile asset, and price swings can be wild. Yes, it’s possible for Bitcoin’s value to soar, but it’s also possible for it to have some epic portfolio streaks of losses.

In fact, Cathie Wood has documented at least four different “Bitcoin pullbacks” in which the price of Bitcoin dropped by more than 77%. These included the nightmarish “crypto winter” of 2022, when the value of Bitcoin absolutely plummeted.

So imagine a hypothetical scenario where you eventually accumulate $500,000 in Bitcoin holdings and are on your way to becoming a millionaire. But what if things go bad over the next year and you lose 77% (or more) of your investment? You’d be back to square one, trying to piece together all the pieces of your shattered Bitcoin stash.

That being said, I do think Bitcoin still has the potential to make you a millionaire. Back then, you could become a millionaire with a small investment of $1,000 or less. But now, given the rise in Bitcoin prices, you might need $63,000 or more to reach that mythical milestone.