The Bitcoin price has been very volatile over the past few years. However, despite this performance, the cryptocurrency still has a lot of supporters. And many investors are still willing to invest in the asset and its crypto peers.
The allure of big profits if Bitcoin eventually takes over as the world’s leading currency is too good to pass up for some. The problem is whether it is possible to tell if the cryptocurrency is worth buying at current levels.
Supply and demand
You see, the value of the cryptocurrency is based on supply and demand. As there is no physical asset underlying the digital code, it has no tangible value. At the same time, Bitcoin does not generate any cash flow. That means it is impossible to value the asset based on cash generation.
However, it is much easier to value stocks and shares. That’s why investing in the stock market could be a better way to make a million over the long term. The stock market might not offer the sort of returns Bitcoin promises, but over the long term, there’s no denying that it has generated an enormous amount of wealth for investors.
According to analysts, over the past 100 years, the UK stock market has produced an average annual return for shareholders of 5.5%. That’s after inflation. While it is impossible to tell what the stock market might do in the near term, it is difficult to argue with these figures.
During the past century, there have been two world wars and a series of economic depressions. However, despite these headwinds, the stock market has still produced a handsome return.
Trend will continue
The chances are high that this trend will continue, even if Bitcoin does take over the world. In this scenario, companies will have to change their systems to use the cryptocurrency, not sterling. That will be the most significant change.
No matter what currency companies use, they will still have to make profits, and this means shareholders should be well rewarded. It’s a win-win situation for investors.
So, while the Bitcoin price might generate significant returns for investors, the chances that the market will yield better returns are much higher, whether the cryptocurrency succeeds or not. That’s why the stock market seems to be a much better long-term investment to make a million.
Since its inception, the FTSE 100 has generated an average annual return of around 9% per annum.
This rate of return is enough to turn a monthly investment of £500 into a £1m a nest egg after 31 years of saving. Bitcoin might be able to produce the same kind of return. However, as we don’t know what the future holds for the cryptocurrency, it is impossible to tell.
Therefore, it does not seem sensible to invest your hard-earned money in this volatile digital asset. The stock market has been creating wealth for savers for generations. It doesn’t seem as if this is going to change any time soon.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.