Bitcoin Is Still 38% Below Its Record. Here's What $1,000 Could Be Worth by 2036.

This year has been tough for Bitcoin (CRYPTO: BTC) holders, as the market remains focused on anything related to artificial intelligence. But the digital asset continues to fight its way out of an ongoing slump. It's up about 30% since the start of July (as of Nov. 2). That still hasn't prevented the leading cryptocurrency from trading 38% below its record.

Patient investors have an opportunity to buy the dip. Here's what $1,000 invested in Bitcoin could be worth in 2036.

Image source: Getty Images.

A 10-fold in 10 years is on the table

Let's first take a look in the rearview mirror. During the past decade, Bitcoin's price has skyrocketed 11,330%. On an annualized basis, this equals a phenomenal 61%. Trees don't grow to the sky, so it's completely reasonable to expect this rate of return to moderate. It also is likely that we are well past the early adopter phase, which means Bitcoin's next era of progress will resemble a more stable march higher.

Still, I am convinced that this cryptocurrency can still have a 10-fold price increase. In the coming 10 years, this would translate to a 26% gain each year. That's significantly lower than what it registered in the past. However, this performance would certainly outpace the stock market's average of about 10% a year.

A 900% return would turn a starting $1,000 investment into $10,000 by 2036. And it will put Bitcoin's market capitalization at roughly $15 trillion, or roughly 10 times its current market value. This figure represents more than half of all above-ground gold's value.

It's hard for any investor not to get excited about this forecast. But it's important to understand that there are a lot of unknowns as we look to the future. Capital could flock to other exciting areas. Regulation could be restrictive. Maybe Bitcoin makes no progress toward becoming a widely used payments network. And there's always a threat from quantum computing advancements undermining its security.

Scarcity, institutions, and fiscal mismanagement

Even accounting for these risk factors, I believe Bitcoin is a great portfolio addition for long-term investors that aren't scared off by the uncertainty and volatility. Here are three primary reasons to be bullish on this top digital asset.

A discussion about Bitcoin isn't complete without mentioning its scarcity. This is arguably its most important characteristic. There will only ever be 21 million bitcoins, of which 20.1 million already circulate. That gives Bitcoin a hard supply cap. That is a far superior setup compared to the unlimited supply of fiat currencies.

History says that there is minimal risk of this structure being altered. The finite supply is supported by the network's various stakeholder groups that want to ensure its integrity and don't want to sabotage its credibility. Furthermore, Bitcoin's decentralization, security, and predictability are traits other cryptocurrencies lack.

In recent years, there has been a flood of capital that has found its way to Bitcoin. It has been almost three years since the Securities and Exchange Commission approved Bitcoin spot exchange-traded funds (ETFs). This milestone essentially legitimized Bitcoin as a global financial asset. And it opened the doors for more money to flow in.

The iShares Bitcoin Trust has been the most successful of the bunch. As of Nov. 2, it had $62 billion in assets.

Consequently, Bitcoin is starting to be viewed as a valuable addition to an investment portfolio. According to River Financial, financial advisors recommend their clients hold a small percentage of Bitcoin among their other investments.

The elephant in the room is also impossible to overlook. I'm talking about the public debt burden. The U.S.'s federal debt balance recently surpassed $40 trillion, with the deficit totaling $2 trillion this fiscal year. Nothing suggests that this trend is slowing down.

Just as they have already started to question the sustainability of this financial situation, during the next decade, a larger number of investors will become more aware of the government's spending problem. That will highlight Bitcoin's appeal, which should add demand and support a higher price.

Neil Patel has positions in iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin and iShares Bitcoin Trust. The Motley Fool has a disclosure policy.