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Bitcoin (CRYPTO: BTC) is once again under fire. The price of the most popular crypto asset on the planet has plunged more than 10% over the past 30 days.
But here's the thing: Bitcoin's price has always been volatile, and its long-term upside potential remains lucrative. That's due to two reasons. First, Bitcoin continues to have a wide value gap relative to another popular asset with similar characteristics. Second, the largest Bitcoin holder will likely never sell. And no, that owner isn't Satoshi Nakamoto.
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Most experienced crypto investors believe that Satoshi Nakamoto is Bitcoin's biggest holder. And in some ways, that's true.
"Satoshi Nakamoto, the pseudonymous creator of Bitcoin, is estimated to hold approximately 1.1 million BTC, accumulated through mining during Bitcoin's early days," reports Kraken, a popular cryptocurrency exchange. "What's interesting is that the thousands of Bitcoin Nakamoto earned from block rewards have never been spent. Instead, these coins lie dormant spread across approximately 22,000 different wallet addresses. If any of these coins moved, it could cause significant fluctuations in bitcoin's value and send shockwaves throughout the wider cryptocurrency industry."
Due to the stakes, Nakamoto may never sell this early Bitcoin position. Or, perhaps Nakamoto is no longer alive to process the transactions. Or, maybe Nakamoto lost the private keys to these Bitcoins. It's also possible that some one else entirely controls the position.
In reality, the largest Bitcoin stake isn't controlled by Nakamoto -- it's controlled by no one.
"[A]nalysts estimate that between 2.3 million and 3.7 million Bitcoins are permanently lost," reports research from Ledger. That range represents 11% to 18% of Bitcoin's fixed maximum supply.
This reality is little appreciated by the market. Imagine if 11% to 18% of the gold supply were suddenly deemed permanently inaccessible. And due to Bitcoin's ownership nature, the number of lost Bitcoins will likely continue to rise over time. So in reality, the biggest owner of Bitcoin is actually no one.
Bitcoin's true supply is likely far lower than many investors realize. That makes Bitcoin's valuation gap with gold even more compelling.
"People use Bitcoin as a speculative asset," observes former Fed Reserve Chairman Jerome Powell. "It's like gold -- it's just virtual and digital."
Gold has a vaunted place in human society given its long history as a store of value. Bitcoin's history is far shorter, but it has one advantage: no cryptocurrency will ever amass a history longer than Bitcoin's. In this way, Bitcoin has the best chances of attaining a long-term status as digital gold.
Right now, Bitcoin's market cap stands at roughly $1.5 trillion. Gold, meanwhile, has an estimated total market value of around $28 trillion. Bitcoin has nearly 2,000% in long-term upside based on its valuation gap with gold alone.
Capturing a larger share of the store-of-value market alone gives Bitcoin plenty of promise, even if closing this valuation gap could take years, or even decades. Bitcoin's ability to serve as a technological foundation for a decentralized economy is almost beside the point.
"We believe Bitcoin is a unique asset because it has both the adoption curve of a disruptive technology and the supply characteristics of gold; e.g., built-in scarcity," highlights research from Fidelity. "Understanding the case for bitcoin requires a recognition that it has at times exhibited many different dimensions--a venture asset that trades 24/7, a buy-and-hold investment, or a gold-like inflation hedge and aspirational money."
It's completely reasonable to value Bitcoin as a venture asset or potential new global currency. But those characteristics are arguably best viewed as long-term optionality, not the asset's core value proposition. Fidelity's research suggests that younger investors may start allocating as much as 7.5% of their portfolios to Bitcoin on average. That compares with just 2% for middle-aged and retired investors.
To be clear, the Bitcoin-gold investment thesis is very long term in nature. And there will be plenty of volatility along the way. But in my view, it's the strongest reason to maintain a reasonable position in most growth-oriented portfolios.
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Ryan Vanzo has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Most Investors Are Wrong About Who Owns the Most Bitcoin. That Misunderstanding Is a Buying Opportunity. was originally published by The Motley Fool
