How Bitcoin Could Help You Retire a Millionaire

According to The Crypto Wealth Report from Henley & Partners, there are 241,700 crypto millionaires in the world right now. Of these, 60% (145,100) are Bitcoin (CRYPTO: BTC) millionaires.

Even more remarkably, the number of Bitcoin millionaires in the world increased by 70% during the past year. So the message is clear: Your best chances of becoming a crypto millionaire right now are by investing Bitcoin.

Bitcoin's incredible track record

The secret to Bitcoin's success is the power of compounding returns. Quite simply, Bitcoin continues to churn out eye-popping returns in most years, and investors are seeing the results. They are earning returns not just on their initial investment, but also on the accumulated returns from previous periods.

Just take a look at Bitcoin's performance during the past five years. In 2020, Bitcoin delivered returns of 305%. In 2021, Bitcoin returned 60%. In 2023, Bitcoin soared by 157%, and in 2024, Bitcoin surged by 125%. The only down year was 2022, when Bitcoin fell by 64%.

Image source: Getty Images.

If Bitcoin can continue to post double- and triple-digit percentage returns most years, the sky's the limit. No wonder many investors think Bitcoin could hit a price of $1 million by the year 2030. Yes, that would require a compound annual growth rate (CAGR) of more than 55%, but if history is any guide, then even this high hurdle rate is certainly within reach for Bitcoin.

New ETFs for Bitcoin investors

Until 2024, investors had to buy Bitcoin directly via a cryptocurrency exchange. That put Bitcoin out of reach for many investors. The learning curve was simply too steep, and the risks were simply too great. Even if you managed to figure out how Bitcoin actually worked, you still had to figure out a way to set up a blockchain wallet and move money safely from the real world to the blockchain world.

The new spot Bitcoin exchange-traded funds (ETFs) that launched in January 2024 changed all that. Suddenly, it became as easy to invest in Bitcoin as it was to invest in a tech stock. As a result, more than $100 billion flowed into these Bitcoin ETFs in 2024. The largest spot Bitcoin ETF -- the iShares Bitcoin Trust (NASDAQ: IBIT) -- now has $89 billion in assets under management.

For investors, the value of these spot ETFs is being able to deliver a highly regulated, low-cost, and convenient way to invest in Bitcoin that involves absolutely zero knowledge about blockchain technology, proof of work mechanisms, or cryptographic hash functions. The barrier to entry, at least from a knowledge perspective, is now as close to zero as possible.

Dollar-cost average (DCA) into Bitcoin

Most investors probably don't have $110,000 to buy a whole bitcoin. That's why it makes sense to dollar-cost average (DCA) into Bitcoin, steadily building up a position over time. In short, investors should plan to allocate a certain amount of money each month for Bitcoin. Then, they should stick to that monthly investment, regardless of what's happening in the broader crypto market.

That approach will save investors a lot of heartache and sleepless nights. By embracing a DCA strategy, you will be able to take all the emotion out of investing. You won't be hanging on every word of Federal Reserve Chair Jerome Powell, or trying to make sense of arcane macroeconomic data.

Buy and hold Bitcoin for the long haul

Just keep in mind: The price of Bitcoin does not just go straight up. Bitcoin is famous for its volatility. While some of this volatility has been smoothed out during the past year, the world's biggest cryptocurrency is still capable of some impressive one-day moves.

In October, for example, Bitcoin was a victim of the crypto flash crash that saw it lose more value in a single day than the U.S. stock market did during the crash of 1929!

That's why you really need to buy and hold for the long haul. Cathie Wood of Ark Invest has put together some impressive data showing that Bitcoin has outperformed every major asset class over a long-enough time horizon. But the minimum holding period is typically four years. If you hold less than that, you might get wiped out by one of Bitcoin's legendary declines.

So that's the formula for becoming a crypto millionaire: Focus on Bitcoin, embrace low-cost investment products such as ETFs, and then dollar-cost average your way to impressive long-term returns. Over a long enough time period, a modest recurring investment might turn into $1 million or more.

Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.