Bitcoin (CRYPTO: BTC) is an asset that’s engineered to be scarce, easy to hold for the long haul, and, increasingly, simple to access in a handful of different types of accounts.
One key question for investors is thus whether steady accumulation of Bitcoin, sustained for years, can actually shoulder a meaningful part of your financial future. The short answer is yes, so long as you recognize it as a pillar of wealth-building rather than a magic carpet ride to an unguarded vault of riches. Here’s what the right approach looks like in practice.
As you may know, Bitcoin’s supply is capped at 21 million coins. About 20 million of them are already circulating, which means most of what will ever exist is already out in the world. So anyone who wants to buy it in the future is probably going to need to buy it from an existing holder rather than from a miner that just produced it.
On that note, new issuance of the coin via mining also slows over time via the halving schedule. Since April 2024, the total number mined per day has been around 450 coins. That’s significantly lower than the daily demand from exchange-traded funds (ETFs), Bitcoin treasury companies, asset managers, and financial institutions. Therefore over the long term, prices are biased to the upside, as supply simply cannot match demand.
And that’s also a big reason why a $1,000 investment in Bitcoin 10 years ago would today be worth more than $468,000.
Such returns are doubtlessly one of the things leading investors to ask if an investment in the coin could be sufficient to set them up for life. Of course, you can’t count on this asset to replay its past performance, but the point is that its supply dynamics have been a very strong driver of its price appreciation, and they’re not about to loosen up at all.
Nonetheless, despite its generally upward trajectory, the coin has also endured brutal declines, and it will endure them again. Since 2014 there have been multiple declines greater than 50%, with the largest episodes averaging near 80%. There won’t be much point in buying it if you can’t hold it through those plunges and buy more when the coin is cheaper. Thankfully there’s an easy way to inoculate yourself against that risk, which I’ll get to in a moment.
