Is Bitcoin Really a Billionaire Maker?

There’s no denying that Bitcoin (CRYPTO: BTC) has hit its share of millionaires in the last decade. As the price of Bitcoin rose from less than $10 to over $50,000, so did the net worth of the patient investors who held onto it. According to the latest Crypto Wealth Reportthere are now at least 40,500 Bitcoin millionaires in the world.

As the price of crypto has continued to rise, so have expectations of the kind of wealth it can create for investors. Some have even suggested that he could be a billionaire one day. Are they right?

Bitcoin prices

By now, you’ve probably heard some pretty weird Bitcoin price predictions. Many of them are focused on reaching a million dollars by the year 2030. But at the Bitcoin 2024 event in Nashville, Tennessee, in late July, Michael Saylor, the executive chairman of the major Bitcoin holder MicroStrategy (NASDAQ: MSTR)took it a step further. He suggested that the crypto could grow to $49 million by the year 2045.

That’s great if you’re a long-term investor willing to wait 20 years for a big return, but just think about the kind of initial investment it would take to become a billionaire.

For the sake of argument, let’s round Saylor’s $49 million estimated price to $50 million. At that price, you would need to own 20 bitcoins to become a billionaire in 20 years. Given Bitcoin’s current price of just over $50,000, this works out to a staggering investment of over $1 million. For most people, this is a deal-breaker.

The “triple maxi” investment thesis.

If you are not already a millionaire, then you will need another path to billionaire status. And that brings us to the “triple maxi” investment thesis that Saylor also presented during his keynote speech at the Bitcoin 2024 event.

This involves unwavering faith in crypto and a willingness to take on massive amounts of new debt and break all the rules of traditional investing.

Before we talk about the triple maxi, though, we need to talk about the “maxi.” Bitcoin maxi (ie maximalists) are investors who believe that all other digital currencies are inferior. For them, it is the be all and end all of the crypto world. As a result, I invest exclusively in it.

And for most of the last 15 years, they’ve been right. There simply hasn’t been a better asset with more growth potential and longevity than Bitcoin. From 2011-2021, it was the best performing asset in the world and it wasn’t even close. The crypto has delivered annualized returns of 230%, compared to 20% for the next asset class, tech stocks.

Becoming a Bitcoin maxi might be enough to put you on the path to millionaire status, but it’s not enough to become a billionaire. To do that, Saylor says, you need to become at least a “double maxi.” — i.e. move all your other financial assets into Bitcoin.

At the same time, double maxis convert as much of their earnings into Bitcoin as possible. In fact, Saylor says he would have to go as far as taking on new debt to buy it. Leverage, he says, is the key to amplifying your Bitcoin returns.

And triple maxis go one step further: in addition to going 100% all-in on Bitcoin and taking on even more debt with the sole objective of buying more, they move to a tax jurisdiction where their earnings cryptos are not taxed or little taxed.

Are you willing to break all the investment rules?

But you can see the problem here, right? In your pursuit of a billion dollars, you should ignore many of the basic rules of investing, such as portfolio diversification.

With a diversified approach, you spread your investments across several different asset classes, each with a different risk-reward profile. That way, when the financial markets crash, you don’t have all your eggs in one basket.

Furthermore, traditional investment rules call for eliminating personal debt so you’re not stuck with monthly payments. Pay off your student loan debt, credit cards, and mortgage. But if you’re a triple maxi, you’re taking on new debt, all in the hope that Bitcoin will appreciate aggressively in price.

Even if the super-bullish Bitcoin price predictions of $50 million come true, and even if you become a triple maxi, the digital currency may not have billionaire potential. I’m still extremely bullish on this long-term, but I’m not about to break all the rules of investing trying to find out.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Is Bitcoin Really a Billionaire Maker? was originally published by The Motley Fool