Is Bitcoin the New Crown Jewel of Growth Stocks?

Is Bitcoin the New King of Growth Stocks?

For the past half-decade, the tech titans known as the "Magnificent Seven" have been on a remarkable ascent. They've doubled, tripled, and in Nvidia's case, increased in value by an astounding 1,980%.

But here's a curveball: Bitcoin has been equally impressive over that same period. Its value has skyrocketed from under $4,000 to its current $65,600. Over the past decade, its performance has been nothing short of mind-boggling.

With the caveat that past returns don't guarantee future performance, I've found myself gravitating towards Bitcoin over the Magnificent Seven lately. Here's why it could be time to add this digital asset to your portfolio.

Unparalleled Upside Potential

Ark Invest's "Big Ideas 2024" report paints a rosy picture for Bitcoin. Over varying timeframes of three to seven years, Bitcoin has trounced every other asset class. Over seven years, it delivered annualized returns of 44%, compared to a measly 5.7% for the average asset class.

And analysts believe this outperformance is poised to continue. Wall Street, hedge funds, and portfolio strategists are consistently raising their Bitcoin price targets. Standard Chartered predicts it will hit $250,000 by 2025.

But that might be just the tip of the iceberg. Tom Lee of Fundstrat Global Advisors forecasts a $500,000 price within five years, while Cathie Wood of Ark Invest doubles down on her $1 million prediction. She even envisions a bullish scenario where Bitcoin soars to $2.3 million by 2030.

Mainstream Embrace

A major catalyst for these skyrocketing valuations has been the recent launch of spot Bitcoin ETFs. These products have made it easier than ever for investors to access Bitcoin, boosting its mainstream appeal.

Before 2024, you needed crypto knowledge, a digital wallet, and an exchange account to buy Bitcoin. That limited its accessibility. Now, you can trade Bitcoin as easily as any stock.

This path to mainstream adoption is exciting because Bitcoin is finally being recognized as a distinct asset class, alongside stocks, bonds, and commodities. Investors may begin to allocate more to Bitcoin to optimize their portfolios.

Fidelity Investments suggests allocating 1% to 3% to Bitcoin. I expect this percentage to grow over time.

Expanding Use Cases

The number of Bitcoin use cases is also on the rise. Ark Invest has identified eight real-world applications, each with significant market potential. Their $1 million price forecast incorporates projections of future growth in these use cases.

One key use case is Bitcoin's potential to replace gold as a long-term store of value. As this trend gains traction, it could push Bitcoin's price higher. Ark Invest predicts Bitcoin could account for 50% of the store-of-value market by 2030. Goldman Sachs Group has a similar forecast.

Long-Term Edge

This isn't a call to abandon the Magnificent Seven. I'm not even suggesting Bitcoin will outperform every one of them in the short term. Nvidia's AI prowess may give it an edge as a high-upside investment for now.

However, over the long haul, I believe Bitcoin has a clear advantage. As its mainstream adoption grows and its use cases continue to expand in value, it has the potential for substantial price gains.

It may not reach that $1 million mark, but I'm confident it can continue to outpace the Magnificent Seven.