Too Late For The Bitcoin Gold Rush?

Money can still be made off Bitcoin purchased today, but scale works against performance matching the massive gains that have created a gold rush mindset for some.

FOMO might be driving consumers to grab bitcoin now, but they might have missed the Gold Rush.

Much like those who ran to California after gold was discovered, people rushing to buy Bitcoin are unlikely to discover the breathtaking fortunes found by the pioneers who came before them.
Money can still be made off Bitcoin purchased today, but scale works against performance matching the massive gains that have created a gold rush mindset in some consumers.

That is because even if each bitcoin grows to hundreds of thousands of dollars in value, it is not the same multiple that someone would have seen with a bitcoin purchased several years ago, said Jamie Hopkins, Carson Group director of retirement research.

Guggenheim Partners’ chief investment officer said Bitcoin’s price could climb to $600,000 eventually, based on the firm’s research, with others projecting $1 million. But even those prices will not match the multiples people have seen over the past several years, Hopkins said.

“If it's worth $600,000, you could 12x your money, which is great,” Hopkins said. “But that is not a lot of people's mindset now. If you put $1 in and you ended up with $50,000. That's a 50,000% run up.”

Hopkins has studied Bitcoin since the cryptocurrency was launched, and said bitcoin and crypto in general are important developments with mammoth potential, but he is also seeing that the public seems to be tantalized by the 10-year growth in value.

'Store Of Value'

Tyrone Ross is the CEO of Onramp Invest, a firm building a cryptocurrency platform for advisors, but he is also seeing the lottery-like lure in a public not ready for the extreme volatility.

“There are those of us who are investing in Bitcoin looking at it as a store of value later, not now. I don't think it's a store of value now,” Ross said. “There are so many stories that you hear of people who put in $1,000 or $10,000 and were able to pay off student loans and were able to send their kids to college. When you get those stories out there, everyone says, ‘All right, well, I want to try it.’”

Bitcoin’s runs have been dramatic, but they are not predictable and can come after lows lasting years. For example, Bitcoin started 2017 at $900 per coin and ended the year at $19,650 by Dec. 15, 2017. Then it steadily slid throughout the year to $3,183 by Dec.14, 2018.
The price did not return to 2017’s high for three years.

The most recent run started after Bitcoin dropped to $5,165 on March 13, 2020, during the pandemic asset rout, and climbed during the year to $61,283 by March 12. Although that is a dramatic increase, it is still about a 12X, and that only applied to people who bought during the rout or soon after.

Consumers looking at the growth of Bitcoin from $1 to more than $50,000 over 10 years might be thinking that if they put some money in Bitcoin now, they could see a commensurate scale over the next 10 years. But for $50,000 to 50,000x, it would have to grow to $1.25 trillion per bitcoin, give or take a few billion.

Ross and Hopkins say that Bitcoin is likely to keep increasing in price, but consumers and advisors have no dependable way to project that growth with metrics such as a price/earnings ratio. Even though the long arc of Bitcoin’s price has been up, that trend line bridges some deep valleys, Hopkins said.

“Like any projection you ran in 2017?,” Hopkins said. “Would it tell you what you then had between 2017 to 2020, where you actually had a net loss?”

Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected]