Bitcoin has had an incredible price run lately, chalking up consecutive green candles week after week. Now at the time of writing it’s near its all-time highs, in the wake of growing institutional interest and fears around fiat currency stability.
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By the time you read this it might have topped US$20,000, sunk further from its previous record or just kept meandering around the US$18,000 range.
Is It Too Late To Buy Bitcoin?
Wherever it’s gone though, it’s still going to be worth asking the big question: is it too late to buy Bitcoin?
The answer to the big question depends on what you’re hoping to get out of Bitcoin.
If you’re hoping to buy Bitcoin to quickly turn a modest investment into a multi-million dollar fortune (and aren’t we all) then by the numbers it’s probably too late.
Consider what would happen if Bitcoin successfully usurped gold and its market cap rose to equal all the gold in the world.
The current value of all gold in the world, at current spot prices, is estimated at US$9.6 trillion. Let’s assume Bitcoin achieves that market cap with a circulating supply of 20 million coins. 9.6 trillion divided by 20 million gives 480,000.
So if Bitcoin manages to get as big as gold is today, that’s a price of US$480,000 per coin.
In other words, a 24x gain over Bitcoin at US$20,000. While undeniably fantastic, it’s probably not going to buy you a reasonably sized private island to retire on unless you’re already incredibly wealthy.
In that respect, Bitcoin is likely already too expensive to be an effective get rich quick scheme. Anyone trying to brand Bitcoin as an easy ticket to riches these days is probably more of a liar than a prophet.
Of course, this is just an example rather than a prediction. Gold and Bitcoin are different things despite frequent comparisons. If Bitcoin actually gets that high it won’t necessarily stop there, though there’s obviously no guarantee it will get that high.
This example is just a way of putting current Bitcoin prices into context against another asset, in this case gold, to emphasise how expensive it already is and how unlikely it is to result in eye-popping riches.
So, is it too late to buy Bitcoin? It depends on why you’re buying it and what you expect to happen next.
What happens next?
Bitcoin proponents will sometimes say things like “Bitcoin isn’t about getting rich fast, it’s about not getting poor slowly”.
They say this a lot more whenever the price is going down.
But there may be some truth to it. Most of the recent institutional investment around Bitcoin has been oriented on it as a store of value and an alternative to the diminishing purchasing power of fiat currencies.
During Bitcoin’s previous cycles of boom and bust these were just hypothetical views of what Bitcoin might someday become. But now, maybe it has finally come true?
So, is it too late to buy Bitcoin? Only if you’re hoping to get rich from it. If you’re looking for a new asset to tuck into your portfolio to help keep it warm in turbulent times, you might be right on time.
Andrew Munro is the cryptocurrency editor at Finder. After previously writing about insurance and other areas, he now covers the latest developments in digital assets and blockchain, and loves every moment of it.