If that’s the case, you might want to save your Bitcoin to pay for something more important than a pizza. In 2010, Laszlo Hanyecz used 10,000 Bitcoins to pay for two pizzas. In February, those Bitcoins were worth $446 million. As of April 12, they were worth more than $600 million.
At this point, unless you’ve made millions on your Bitcoin and don’t care, to pay for pizzas or even a Tesla (NASDAQ:TSLA) with the virtual currency makes absolutely zero sense.
However, if Kiyosaki is correct, an investment of $60,000 in Bitcoin today will pay for a nice, million-dollar house in 2026.
So, the question Clint Eastwood might ask is, “Do you feel lucky, punk? Well, do ya?
I have a hard time believing Bitcoin will appreciate by an average of 82% annually in each of the next five years. However, over the past five years, Bitcoin gained an average of 169% annually.
A financial guru thinks that Bitcoin is a sure thing. What could go wrong? I’ll look at two possibilities.
The Government Will Regulate Bitcoin
Many well-known individuals are on record saying the government will step in to ban Bitcoin or severely regulate it. These critics include billionaire hedge fund manager Ray Dalio.
“I think they [the government] will try. But, the problem is too big,” Kiyosaki told Kitco News recently. “Our pensions are going bust. Baby boomers have no money. They shut down the economy. They’re gonna print … another $1.9 trillion. So, it has never worked.”
Unfortunately, as much sense as Kiyosaki makes about holding on to Bitcoin and spending the “fake” greenback, his assertion that Janet Yellen and Joe Biden are Communists suggests his thought process leaves a lot to be desired.
Ray Dalio’s recently argued that, just as Washington outlawed gold in the 1930s, it is likely to forbid the use of Bitcoin.
“[B]ack in the ’30s in the war years … because cash and bonds were such bad investments relative to other things, there was the movement to those other things, and then the government outlawed them,” Dalio told Yahoo Finance on March 24. “They outlawed gold.”
Some believe Bitcoin has come too far to be outlawed entirely.
Securities and Exchange Commission (SEC) Commissioner Hester Pierce recently stated that she doesn’t feel the cryptocurrency can be banned and further stated it would be foolish for the government to do so.
She’s optimistic that the incoming SEC chairman, Gary Gensler, who is quite knowledgeable about cryptocurrencies, will help bring Bitcoin fully into the mainstream.
I have no idea who’s correct about this issue. However, the question mark hanging over Bitcoin will not make it less volatile over the remainder of 2021.
Investors Look to Alternatives
While Ray Dalio argues that Bitcoin is not a good way to store value, let’s assume for argument’s sake that it is. However, its biggest weakness is that it cannot be used for anything other than trading, investing, and purchasing.
Some investors may decide that other cryptocurrencies such as Ethereum (CCC:ETH-USD) and Cardano (CCC:ADA-USD) store value and are more useful than Bitcoin, making them more attractive in the long-run.
As I’ve said in the past, I could not care less about gold, even though many investors find the precious metal’s tangible nature very appealing. When it comes to gold, I agree with Warren Buffett, who believes the metal “has no utility.”
Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), however, actually bought 21 million shares of Barrick Gold (NYSE:GOLD) in the second quarter of 2020. But Berkshire dumped its position by the end of the year.
I’m not sure why Berkshire bought Barrick’s stock in the first place, but clearly it had a quick change of heart.
In my April 7 article about Cardano, I said the following about the up-and-coming cryptocurrency:
“I’m going to continue to learn about Cardano and Ethereum and what makes them similar and different. In the meantime, as cryptocurrencies go, I’d stick to Bitcoin if your only need is a store-of-value.”
“However, if you want to be a part of something bigger, I couldn’t think of a better choice than Cardano.”
Cardano looks like a major player when it comes to decentralized finance (DeFi). Ethereum is clearly in the same boat. Both will continue to be desirable alternatives to Bitcoin in the years ahead.
If they ever become as popular as Bitcoin for storing value, life could get pretty tough for Bitcoin holders.
The Bottom Line
The thing that sets Bitcoin apart from most cryptocurrencies is that 21 million Bitcoins were issued when Satoshi Nakamoto created the cryptocurrency in January 2009. And while it’s possible that Satoshi Nakamoto could issue more, it’s unlikely that he will do so.
Theoretically, if the supply of Bitcoins remains at 21 million, there’s nowhere for Bitcoin to go but up. So Kiyosaki’s prediction isn’t as crazy as it sounds.
At the moment, Bitcoin’s market capitalization is $1.26 trillion. If the price of Bitcoin jumps to $1.2 million, its market capitalization would be $25.2 trillion. That’s a lot of stored value.
I’m not sure what will happen if everyone tries to sell their Bitcoins at the same time. While it’s unlikely, that possibility should keep Bitcoin quite volatile between now and 2026.
If you buy Bitcoin at today’s prices, I hope for your sake that Kiyosaki turns out to be right. I guess we’ll find out.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.