Bitcoin (CRYPTO: BTC) recently hit a new all-time high, which has become a frequent occurrence this year. On Aug. 14, the leading cryptocurrency's price reached $124,457.
Even with its volatility, Bitcoin has been one of the most lucrative assets to own for patient investors. It's up 855% during the past five years (as of Aug. 16). I don't expect it to match those results in the future, but I predict that it will be worth $500,000 per coin in 2030.
Although many cryptocurrencies are overly complicated, Bitcoin has a relatively straightforward use case as a digital store of value. Investors buy it with the expectation that it will maintain or increase its value better than other assets.
This wasn't the original idea behind Bitcoin. The Bitcoin white paper described it as an "electronic cash system" that doesn't require any financial institution or governing body. But hardly anyone uses Bitcoin as a digital currency, even though that was the intention in 2009 when it launched. People who own Bitcoin want to hold on to it, not spend it. Transactions are also slower and more expensive with Bitcoin than with other types of cryptocurrency, so it's not the most efficient way to send money.
One reason Bitcoin works as a store of value is because the supply is capped at 21 million coins. There's no way to create more Bitcoin, and that limit has given it a reputation as digital gold. Just like gold's rarity makes it more valuable than more common precious metals, Bitcoin's small maximum supply is an advantage compared to cryptocurrencies with billions of coins available. Bitcoin is also more proven than any other cryptocurrency, having been around the longest and surviving several bear markets.
The Bitcoin market used to be almost entirely retail investors. In recent years, more and more institutional investors and corporations have come on board.
A key turning point was when the Securities and Exchange Commission approved the first spot Bitcoin exchange-traded funds ETFs in January 2024. ETF approval gave Bitcoin more legitimacy as a financial asset and opened it up to institutional investors, including hedge funds and investment banks. Institutional investors with no intention of going on a crypto exchange now had the option of buying Bitcoin ETFs instead. Since their SEC approval, Bitcoin ETFs have had inflows of about $55 billion.