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1 Hot Cryptocurrency to Buy Before It Soars 2,100%, According to Cathie Wood’s Ark Invest
Ark Invest believes the cryptocurrency could be worth $1.48 billion by 2030.
Cathie Wood is the CEO and Chief Investment Officer of Ark Invest, an asset management firm focused on disruptive technologies such as blockchain and cryptocurrencies.
Wood and his team see substantial upside in the cryptocurrency market, driven by innovations in smart contracts and decentralized finance. But Ark is particularly bullish on Bitcoin (BTC -1.09%). His bull-case valuation model values Bitcoin at $1.48 million by 2030, implying an upside of more than 2,000% from its current price of nearly $71,000.
Ark clearly sees Bitcoin as an asset worth buying. But investors should understand the investment thesis and potential risks before making any decisions.
The Investment Thesis for Bitcoin
The investment thesis for Bitcoin It’s simple. Like any good, its price is a product of supply and demand. Bitcoin is a bit atypical because its supply is limited to 21 million coins due to the periodic reduction of Mining Rewards known as halving. To elaborate, miners are rewarded with Bitcoin when they add blocks of valid transactions to the Blockchainbut the reward is halved every 210,000 blocks.
As a caveat, the supply cap is theoretically subject to change, but the chances of that happening are slim to nonexistent. It would require consensus among those running the nodes, the computers that run the Bitcoin software. But those network participants would have no reason to approve such a change because increasing the supply would devalue the cryptocurrency.
For this reason, we can assume that demand will remain the most important variable when it comes to Bitcoin. This means that more demand will move its price higher, and less demand will move its price lower. At the moment, demand seems to be trending upward. The number of wallet addresses According to Fidelity, holding at least $1,000 in Bitcoin hit a new all-time high in late December 2023.
However, demand would need to increase substantially for a single Bitcoin to reach $1.48 million by 2030. At that point, Wood’s Ark Invest outlined several sources of potential demand that support its valuation model.
Ark Invest Valuation Model for Bitcoin
Ark Invest has published a 2023 Bitcoin valuation model that posits three price trajectories that the cryptocurrency could follow through the end of the decade. These trajectories (and the implied upside from the current price of $63,000) are:
- Bear Case: $258,500 (360% increase)
- Base case: $682,800 (960% upside)
- Case of the Bull: $1.48 million (up 2,100%)
In the report, Ark highlighted eight sources of demand that could drive Bitcoin higher, but four sources (Bitcoin as a corporate treasury asset, a nation-state treasury asset, a remittance asset, and an economic settlement asset) have little to no impact on price trajectories. Instead, Ark attributes the vast majority of potential gains to the four sources of demand:
- Emerging Market Currencies: Ark believes that Bitcoin will represent 0.5% (bear) to 10% (bull) of the currency in emerging markets by 2030. An emerging market is a country that is experiencing robust economic growth, but does not yet possess all the qualities of a developed country.
- High Net Worth Individuals: Ark believes that Bitcoin will represent 1% (bear) to 5% (bull) of assets held by high net worth individuals (HNWIs) by 2030. The term HNWI generally refers to individuals with liquid assets of at least $1 million.
- Institutional Investors: Ark believes that Bitcoin will represent 1% (bear) to 6.5% (bull) of institutional assets by 2030. Institutional assets refer to money invested by financial advisors, endowments, hedge funds, and other financial institutions.
- Gold: Ark believes that Bitcoin will capture 20% (bear) to 50% (turin) of the money that retail investors would otherwise have put into gold by 2030.
Bitcoin hasn’t yet met any of the bear-case conditions, let alone the bull-case conditions, but it is moving in the direction of the upside. In December, Forbes reported that “Bitcoin has become increasingly important in emerging and developing economies, especially in areas where traditional financial systems are inadequate or inaccessible.”
Additionally, a 2023 survey by consulting firm Ernst & Young found that “all segments of institutional investors plan to increase investment in digital assets and/or related products over the next two to three years.” And Paul Maley, global head of securities services at German bankrecently told Reuters that Bitcoin “is set to be a top priority for investors and businesses” as the cryptocurrency market expands.
With this in mind, recently approved spot exchange-traded funds (ETFs) Bitcoin could help unlock demand among HNWIs, retail investors, and institutional fund managers. These Bitcoin ETFs provide direct exposure to the cryptocurrency without the hassle of specialized exchanges or blockchain wallets. In fact, Wood recently told CNBC that the spot approval of Bitcoin ETFs makes her more confident in the price trajectory of the bull case.
Bitcoin Could Be a Worthwhile Investment, But Avoid Getting Pegged to Price Targets
Wood isn’t the only one considering a price target of more than $1 million. Jurrien Timmer, director of global macro at Fidelity, believes Bitcoin could hit $1.2 million by 2030 if its adoption rate mirrors that of mobile phones. He also offered, however, a less aggressive model that shows Bitcoin hitting $343,000 by 2030 if its adoption rate mirrors that of the Internet.
The lesson for investors is not to get fixated on a particular valuation model. Decisions should be made based on known facts. Specifically, Bitcoin has returned 1,540% over the past five years, a sensational figure that easily outperforms every other major asset class. Furthermore, any investor who has bought and held Bitcoin for at least five years has made money, regardless of when they made their initial purchase. However, Bitcoin has also fallen more than 50% from an all-time high on three separate occasions in the past five years, and similar volatility is likely in the future.
In short, Bitcoin is a volatile asset best suited to risk-tolerant investors with a long time horizon. Anyone who meets these conditions should consider buying a small position today.