[GUIDE] How should you think about your bitcoin’s long-term returns?
[GUIDE] How should you think about your bitcoin’s long-term returns?
TL;DR: Bitcoin has attracted significant investor attention due to its sharp price swings and the view that it may function as a long-term store of value. However, assessing its future performance is difficult given its limited history and high volatility.
Bitcoin Has Risen Much Faster Than Other Assets Over the Past 10 Years
Bitcoin has become a hot topic in the world of investing, drawing attention for its dramatic price swings and potential as a financial asset. As it shifts from being just a digital payment system to a store-of-value^(1), many are curious about how bitcoin might fit into their investment portfolios and what its future might hold. However, predicting bitcoin’s price is tricky due to its short history and high volatility. While it has delivered impressive returns over the past decade, strategists at Morgan Stanley suggest that such performance might not continue in the coming years.
In this guide we’ll cover:
- How investors try to assess bitcoin’s potential returns
- Five scenarios for long term returns
- Risks to investing
Click here to learn more about crypto trading* at E*TRADE from Morgan Stanley.
How to Think About Bitcoin's Future Returns
When considering bitcoin's long-term potential, it helps to think of it like a commodity^(2), such as gold, which is valued based on supply and demand, rather than stocks or bonds, which are valued based on expected profits. The supply of bitcoin is relatively predictable because its growth is controlled by the software that runs its network. Currently, there are about 19.9 million bitcoins, and this number is expected to grow to around 20.8 million over the next ten years.
Demand for bitcoin is influenced by two main factors: the total market of wealth that could be stored in bitcoin and how much of that wealth is actually stored in bitcoin. The market includes liquid assets like cash and savings accounts, which Morgan Stanley strategists see around $130 trillion globally as of October 2025. The actual wealth stored in bitcoin is referred to as penetration. Simply dividing bitcoin’s market capitalization of $2.2 trillion as of October 2025 by $130 trillion in wealth, as defined above, suggests it has a penetration of about 2%.
Possible Scenarios for Bitcoin's Future
Experts have outlined five possible scenarios for bitcoin’s future returns, each based on different assumptions about how widely it will be adopted and how the market will grow.
- A conservative scenario assumes bitcoin adoption has peaked, leading to a modest 6.4% annualized return over 10 years.
- A moderately optimistic scenario assumes bitcoin users will grow with the U.S. population, suggesting a 7.2% annualized 10-year return.
- A more aggressive scenario considers continued growth in bitcoin users, implying a 9.8% annualized return over 10 years.
- A bearish scenario accounts for declining adoption, pointing to a 4.2% annualized 10-year return.
- Lastly, a sudden drop in bitcoin's popularity due to risks like security issues such as broken encryption or a serious software bug could significantly impact returns.
Consider the risks
These estimates are meant to show how supply, addressable market, and the overall wealth stored in bitcoin works. For those considering investing in bitcoin, it's important to weigh these scenarios and the risks involved, such as potential security breaches, software bugs, government regulations, or even losing the entire investment. These assumptions don’t incorporate these risks which are difficult to quantify. For that reason, investors may want to be conservative when setting their other inputs.
Even if the scenarios may not always hit the mark, they can still be helpful as a planning tool. Most importantly, the framework gives investors a structured way to test their own views on money supply, user growth, and actual wealth stored, to plan accordingly.
Conclusion
It’s important to note these estimates are illustrative and Morgan Stanley does not endorse these underlying assumptions. While bitcoin offers exciting possibilities, its future is uncertain, and investors should approach it with caution and a clear understanding of the factors that could influence its value. Learn more about crypto trading* at E*TRADE from Morgan Stanley.
Morgan Stanley’s Global Investment Office makes no recommendation regarding whether to buy or sell bitcoin but encourages investors to get educated. Ultimately, investing in bitcoin or any other cryptocurrency should be based on thorough research and understanding of the asset class. Investing in cryptocurrency is highly speculative and may result in a loss of the entire investment.
^(1) Generally, a store-of-value asset should be liquid, should not deteriorate with time and should hold its value over time. Many bitcoin holders believe it has these characteristics, while others disagree.
^(2) Although this analysis is comparing bitcoin to commodities for the purpose of estimating returns, bitcoin has its own features and risks that are different than commodities. Specifically, bitcoin is a digital commodity subject to software and encryption risk which most other commodities do not have. Also, unlike most commodities it is not used up, it’s always available unless lost.
*Crypto trading at E*TRADE from Morgan Stanley is powered by zerohash.
The source of this article, AlphaCurrents Crypto: A Framework for Long-Term Return Assumptions, by Denny Galindo, Sophia Psaila and Aashi H. Tailor, was originally published on December 9, 2025.
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Disclosures
Investing in digital assets is highly risky and may result in total loss. Transactions and custody are provided by Zero Hash LLC through a separate, non‑brokerage account that is not affiliated with Morgan Stanley Smith Barney LLC. Digital assets are not FDIC insured or SIPC protected. Zero Hash LLC and Zero Hash Liquidity Services LLC are licensed to engage in Virtual Currency Business Activity by the New York State Department of Financial Services. All investing involves risks. Securities products offered by Morgan Stanley Smith Barney LLC, Member SIPC. E*TRADE is a business of Morgan Stanley.
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This material indicates the results generated by an Investment Analysis Tool (the “Long-Term Return Tool”) to project the performance of cryptocurrencies under different scenarios (referred to throughout as “Scenarios”), including how the annualized implied returns of such cryptocurrencies may be affected by changes in penetration, cryptocurrency supply and global store-of-value market growth.
Results may vary with each use and over time.
IMPORTANT: The projections or other information generated by the Long-Term Return Tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results.
The universe of investments considered in the Long-Term Return Tool’s analysis is limited to cryptocurrencies such as Bitcoin and Ethereum, and such selectivity is due to Bitcoin’s and Ethereum’s respective share of the market capitalization of cryptocurrency assets. Please note: Bitcoin and Ethereum may not reflect broader cryptocurrency asset risk/return profiles and smaller or newer tokens may behave very differently. Other investments not considered may have characteristics similar or superior to those being analyzed.
Please review important disclosures below for a description of criteria and methodology used. In addition, please see below for a description of the Long-Term Return Tool's limitations and key assumptions, such as sensitivity to inputs, reliance on long-term adoption assumptions, volatility of cryptocurrency assets, and uncertainty of future regulatory and market conditions.
RESULTS OF THE SCENARIOS ARE NOT GUARANTEES OF WHAT WILL HAPPEN BASED ON THESE ASSUMPTIONS.
Criteria. The Long-Term Return Tool estimates hypothetical 10-year annualized implied returns for cryptocurrencies based on adjustable inputs reflecting (i) projected cryptocurrency supply growth, derived from each cryptocurrency's programmed or expected issuance schedule and, where applicable, burn or staking mechanisms; (ii) projected growth in demand for store-of-value assets, measured by growth in the total addressable store-of-value market (defined to include major global currencies such as U.S., Eurozone, U.K., Swiss, Chinese, and Japanese M2 money supply, gold, and cryptocurrencies); and (iii) projected changes in a cryptocurrency's penetration of that market.
Methodology. The Long-Term Return Tool applies a supply-and-demand framework in which demand-side inputs (store-of-value market growth, changes in penetration or market share, and, where applicable, supply impacts from staking participation) are compounded over a 10-year horizon, divided by 10-year compounded cryptocurrency supply growth, and annualized to produce the implied return. Illustrative Scenarios reflect different input combinations (such as no change, growth in line with population or historical adoption curves, declines, sudden drops, and conservative, aggressive, or bearish demand-and-supply assumptions) and are not forecasts of likely outcomes. Actual results may differ materially from all illustrated Scenarios. Underlying historical data are derived from third-party sources, including Bloomberg, the Federal Reserve M2 series (FRED), and other publicly available cryptocurrency and market data providers. Such sources are believed to be reliable but are not independently verified, and data quality, consistency, and availability may vary, particularly with respect to cryptocurrency markets.
Key Assumptions. The Long-Term Return Tool's outputs depend on material assumptions, any of which may prove incorrect, including that each cryptocurrency's expected issuance schedule (including scheduled supply events such as halvings, block reward changes, or burn mechanisms) will occur as anticipated and that block production rates remain consistent with current expectations; that the selected store-of-value universe reasonably represents the total addressable market; that current protocol rules, network economics, and staking incentives remain broadly consistent over the projection period; that long-term store-of-value demand can be reasonably approximated by historical money supply growth; that penetration, market share, and staking participation are appropriate proxies for adoption; and that implied returns are nominal and not adjusted for inflation. All outputs depend wholly on the selected inputs, and different inputs will produce materially different results.
Limitations. The Long-Term Return Tool is model-based and does not reflect actual trading, transaction costs, taxes, custody or exchange fees, slippage, liquidity constraints, or investor behavior, and actual results will differ, potentially materially. The defined store-of-value market may not capture all sources of demand, and other instruments used as stores of value (including smaller currencies, alternative digital assets, commodities, and real estate) are not modeled. Changes to a cryptocurrency's supply curve, issuance, burn mechanisms, staking incentives, software upgrades, forks, or events resulting in lost or burned tokens could materially alter actual results relative to the model. The Long-Term Return Tool does not incorporate future regulatory, tax, sanctions, or policy developments, which could materially affect adoption, demand, market access, and valuation. Adoption proxies may not fully capture network usage, decentralized finance activity, competing Layer-1 and Layer-2 ecosystems, or other factors. Historical inputs are derived from third-party sources believed reliable but are not independently verified and may be revised. Implied returns are highly sensitive to assumptions, and small changes in inputs can produce materially different results. The Long-Term Return Tool's analysis is limited to selected cryptocurrencies and does not consider other cryptocurrencies, digital assets, or asset classes that may have similar or superior characteristics.
Cryptocurrencies are highly volatile, speculative, and subject to rapid changes in valuation, involve a high degree of risk including the potential loss of the entire amount invested, and may not be suitable for all investors. Historical data on cryptocurrencies may be limited or not indicative of future performance, and regulatory, technological or market developments related to cryptocurrencies may materially impact outcomes.
Past performance is not indicative of future results. The projections and Scenarios generated by the Long-Term Return Tool are hypothetical, do not reflect actual investment results, are not guarantees of future performance, are intended for informational and educational purposes, and are not intended to constitute investment advice or a recommendation.
Posted Jul 10, 2026, 4:23 PM UTC · locked