If you invested $1,000 in Bitcoin in 2017, here’s how much you’d have now

At the start of 2017, Bitcoin (BTC -1.70%) had been through some dark days as a resource. The cryptocurrency’s value peaked above $1,000 in late 2013, but fell to between $200 and $400 for most of the next four years.

But it recovered to reach $998.62 in early 2017, meaning an investor buying $1,000 worth would have bought a little more than an entire Bitcoin. Today, the initial investment of $1,000 would be worth $22,800. The big question for investors now is whether Bitcoin can deliver the same returns again over the next six years.

Bitcoin is back to prominence

First, let’s remember how exactly Bitcoin got to where it is today. The original crypto has certainly benefited as more money has flowed into cryptocurrency and digital assets. The first coin offering (ICO) craze of 2017 – where hundreds of new tokens were sold to the public, even though the utility of some tokens was questionable – brought more awareness to Bitcoin. But while many of the coins launched during this period suffered sharp price drops afterwards, Bitcoin emerged largely unscathed.

The pandemic brought investors more money through stimulus funds and low interest rates, prompting many to chase higher-risk assets like Bitcoin. All this led to a huge Bitcoin price rise in 2021. But the coin fell sharply in 2022 as interest rates rose and investors sold off high-risk assets.

In June 2022, inflation peaked from the pandemic era. Meanwhile, by the end of June 2022, Bitcoin had fallen to just over $20,000 — down more than 70% from the all-time high of $67,617.02 it reached in November 2021. As a result, the argument that Bitcoin may become used as an inflation hedge fell apart.

The inflation rate in the United States by YCharts

The competition is stronger than ever

However, the inflation problem is not Bitcoin’s only problem. The competition in the cryptocurrency sphere is looking increasingly fierce. More and more tokens, exchanges and technologies improve the original Bitcoin idea and strive to earn even more efficient forms of digital money. Ethereum (ETH -2.16%)for example, was the first major blockchain to introduce smart contracts, which has made crypto intelligent in a way that Bitcoin has yet to do at scale.

Solana (SUN -3.60%) took it to the next level, introducing a blockchain that can complete thousands of transactions per second for a fraction of a second each. If, like me, you believe that new innovations and businesses will be built on top of the blockchain, then speed, cost and capacity are key elements of the technology.

The harsh reality is that Bitcoin lags behind in these areas. If you’re looking for a simple store of value in crypto, there’s an argument to be made that Bitcoin may still be your best option at the moment. But I don’t think Bitcoin’s future is as bright as its past.

What is the future of Bitcoin?

I doubt the next six years will be as good as the last six years for Bitcoin. The competition is steeper than ever and more innovation is happening on other blockchains. Plus Bitcoin not being able to keep up as an inflation hedge has really been a blow to the digital asset. When high prices upset the traditional market, Bitcoin’s trading pattern appears to follow growth stocks and other risky assets rather than act as a true hedge against inflation.

Security and performance are also an issue. A very small number of miners control half of the mining capacity for Bitcoin, and when the price recently fell, they came under financial stress. Even publicly traded Bitcoin miners have seen their shares and financial strength weaken dramatically. Since Bitcoin is still a proof-of-work blockchain, it requires miners to validate transactions. A large number of miners are needed to keep the blockchain secure and prevent Bitcoin from being controlled by a single, small group. As Bitcoin falls in price and it becomes less profitable to mine Bitcoin, this security will be under increasing pressure.

The next few years may not be nearly as good for Bitcoin as competing blockchains improve and Bitcoin’s provenance declines. Since the start of 2017, Bitcoin has been a big winner. But the previous performance does not seem to continue to the same extent. Even if cryptocurrency is the future of finance or data storage, I doubt it will be Bitcoin that has the largest market share. I would rather bet that the title will go to the token’s current competitors, like Solana or Ethereum, who continue to innovate and drive the future.