When Bitcoin ( BTC 0.65% ) debuted in 2009, the finance realm didn’t flinch. Each coin was essentially useless, and the price of Bitcoin did not break the $1 barrier until 2011. Even after that, very few people recognized Bitcoin for what it truly was: a spark that would ignite a multi-trillion-dollar industry.

Today, the cryptocurrency market is worth around $2.2 trillion, up by more than 1,000% in the last two years. Gains of that magnitude are unprecedented in the history of finance, but the crypto market is only worth a small fraction of the global equity market, which has a value of $125 trillion. In other words, if cryptocurrencies are as revolutionary as many people think they are, there’s still money to be made. And Bitcoin appears to be an excellent bet.

Here’s why.

A durable competitive edge

Bitcoin is the most well-known cryptocurrency. It was originally developed on blockchain tech, a record-keeping system that keeps track of transaction data without relying on traditional banks. As a result, Bitcoin is considered to be a sort of digital cash, allowing customers to transact directly with merchants and eliminating the need for credit cards and banks.

Furthermore, Bitcoin is a limited resource. Its source code restricts the number of coins to 21 million. And because its supply is restricted, its buying power should theoretically increase over time, making Bitcoin deflationary in nature. In fact, a recent Bloomberg article claims that while the consumer price index in the United States has ascended by 28% over the last decade, bitcoin’s value has deflated by 99.996 percent. Put differently, while the US dollar is worth less than it was ten years ago, bitcoin is nowadays vastly more valuable.

Bitcoin’s first-mover advantage and limited quantity have made it by far the most popular cryptocurrency. In reality, with a current market capitalization of $885 billion, Bitcoin accounts for 41% of the entire crypto market value. Investors should be optimistic about future demand, which will hopefully push its price up even more.

A multi-trillion dollar catalyst

Retail traders were early adopters of cryptocurrencies, but the market is now big enough to accommodate institutional involvement. In reality, a recent poll from Fidelity found that 52% of institutional investors own digital assets, but just over 90% believe in them. Furthermore, 37% of those polled already hold Bitcoin in their personal portfolio or a client’s portfolio; making it the most popular crypto asset among institutions.

In addition, 71% of respondents said they plan to purchase digital assets in the future, suggesting that crypto adoption is on the upswing. That bodes well for the sector as a whole, and especially for popular cryptocurrencies like Bitcoin. According to Bloomberg, institutional investors manage over $100 trillion in assets, and a small fraction of that could significantly boost the crypto market. For example, Cathie Wood, CEO of Ark Invest, thinks that if institutions invested just 5% of their funds in Bitcoin, its price would reach $500,000 per coin. Better yet, Wood believes that this might happen by 2026. If that occurs, it will imply more than tenfold gains for investors (based on current pricing at $47,000 per coin).

However, even if it does not happen, Bitcoin still has a solid competitive edge, and institutional adoption should still drive significant price increase. That is why this cryptocurrency appears to be a wise long-term investment.

Author: Scott Dowdy

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