Bitcoin’s Potential to Join the Trillion-Dollar Club by 2028

Bitcoin (BTC) has experienced an extraordinary rise over the past decade, with its price soaring approximately 20,000% since September 2013. This remarkable growth signifies a compound annual growth rate (CAGR) of 70%, significantly outpacing traditional stock market returns. Looking ahead, there is a potential for Bitcoin’s market capitalization to double by 2028, potentially joining the ranks of the trillion-dollar asset club.

In recent years, Bitcoin has drawn increasing interest from institutional investors, marking a notable departure from its earlier phase dominated by individual enthusiasts—primarily tech-savvy users excited by this innovative form of currency. Currently, not only individuals but also governments and major corporations hold Bitcoin, and the emergence of publicly traded mining companies demonstrates a significant evolution from the early days when even a standard laptop could facilitate transactions on the network.

Investor focus is presently on the possible approval of Bitcoin spot exchange-traded funds (ETFs). Well-recognized asset management firms have submitted applications for these funds. The introduction of such ETFs would enhance accessibility and provide convenience for investors looking to engage with this digital asset, further solidifying Bitcoin’s status as a legitimate financial asset.

Regulatory clarity plays a vital role in the future of Bitcoin. The chair of the Securities and Exchange Commission has previously remarked that he considers all cryptocurrencies, except Bitcoin, as securities that require rigorous regulatory supervision. By categorizing Bitcoin as a commodity, it can be argued that its creation and existence have remained within legal boundaries, particularly as there is no single entity controlling it.

The approval of spot ETFs, coupled with a clearer regulatory framework, would likely diminish the risks associated with Bitcoin ownership. This is especially relevant given the heightened focus on industry regulations following notable events such as the collapse of FTX last year.

For Bitcoin’s market capitalization to double over the next five years, its price would need to increase at an approximate CAGR of 15%. While this figure may seem conservative given Bitcoin’s historical performance, it still presents a potential for returns that could surpass those of the stock market. The factors discussed are among the several that could positively influence Bitcoin’s trajectory in the near term.

Additionally, Bitcoin’s durability further enhances its credibility. Having existed for nearly 14 years without any successful hacks, the Lindy effect posits that the lifespan of a technology increases with each year it remains relevant. The longer Bitcoin persists, the less likely it is to disappear.

Nonetheless, investors should remain aware of the inherent volatility associated with Bitcoin. The cryptocurrency has faced several significant downturns exceeding 50% throughout its history, a trend that is unlikely to change. For those willing to bear the associated risks, including a small allocation—such as a 1% stake in Bitcoin—may be a prudent approach within a well-diversified investment portfolio.

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