It may be a wild ride, but this cryptocurrency could generate some serious wealth. Here’s why

Cryptocurrency has become a staple investment for younger investors. According to research by The Motley Fool, about 70 percent of millennials and more than half of Gen Z investors surveyed are at least likely to own cryptocurrencies. About 75% of crypto buyers consider it an investment, not a quick gamble.

However, cryptocurrencies have proven to be highly volatile, which can test even the staunchest of investors.

There are many cryptographies, but Bitcoin (BTC 1.21%) remains a top option for long-term investors.

Here’s why Bitcoin could make you a lot of money in the long run.

It’s already been done

Cryptocurrencies are a little different from stocks. Stocks represent businesses with intrinsic value, so stock prices are influenced over time by how the underlying business performs. Cryptocurrencies only depend on supply and demand because they represent nothing. Many cryptos serve a purpose that can create demand, but their prices ultimately depend on how much someone is willing to pay for them.

That makes Bitcoin’s long-term performance significant. In 2021, there was a bubble due to zero percent interest rates artificially increasing demand for almost every speculative asset. Most cryptocurrencies haven’t revisited those 2021 highs since the bubble popped in 2022, but Bitcoin did.

Bitcoin Price Data by YCharts.

What does this mean? Demand for Bitcoin has increased over time, supporting higher prices. Bitcoin has outperformed the stock market as an investment over the past five and 10 years. A $1,000 investment made a decade ago is worth $118,000 today. While no one should assume these returns will continue, Bitcoin’s long-term performance underscores its strong demand, a contrast to most cryptocurrencies.

Can it continue?

Bitcoin is an anti-inflationary asset. Miners are constantly creating new bitcoins, but the pace slows as the supply grows. The final maximum supply is 21 million coins (currently around 19.8 million are in circulation). Limiting supply supports higher prices as demand for Bitcoin increases.

If the demand for Bitcoin increases faster than the supply, the price of Bitcoin should increase.

But that’s not all. The price of Bitcoin is in US dollars, the supply of which is constantly increasing. Inflation weakens the dollar, which, all else being equal, can increase the price of Bitcoin. These two factors could push Bitcoin’s price higher over time, although investors are hotly debating Bitcoin’s long-term price target. Ark Invest’s Cathie Wood, for example, has a price target of $3.8 million for 2030, although this is clearly an outlier.

Ultimately, no one knows the future price of Bitcoin, so it’s best to focus on what could drive demand. Price will likely follow.

Should Investors Buy Bitcoin Today?

If there’s one thing you can count on, it’s volatility. You can see below that Bitcoin typically drops 10%, often drops 30%, and can drop over 60% from its peak at times.

Bitcoin Price Data by YCharts.

Remember, Bitcoin is not an underlying asset or business, so there are no buffers per se when cautious investors start selling, or greedy investors won’t stop bidding up prices.

Thus, the best investment strategy for Bitcoin is to buy slowly and often, a technique known as dollar cost averaging. Buying Bitcoin regularly can help you build an investment at different price points, resulting in a mixed average in the middle. You won’t be buying at the top or bottom, but you should have plenty of room for ROI if Bitcoin continues to do anything like it has in the past.