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This cryptocurrency could rise 5,300% by 2030, according to Cathie Wood of Ark Invest
Ark Invest’s Cathie Wood continues to raise her price predictions Bitcoin (CRYPTO: BTC). At the recent Bitcoin Investor Day event in New York City, Wood increased his Bitcoin price prediction for 2030 to $3.8 million from an already lofty figure of $1.5 million. Given today’s price of around $70,000, that would be an eye-popping gain of around 5,300% in just six years.
At first glance, the prediction seems outlandish. However, there are two key catalysts that could eventually make this a reality.
Institutional adoption
The primary factor pushing Bitcoin to previously unthinkable levels is stronger-than-expected institutional adoption. Quite simply, large institutional investors are waking up to the idea that Bitcoin is an asset class in its own right worthy of inclusion in their portfolios. With the launch of the new spot Bitcoin Exchange Traded Funds (ETFs)they now have a regulated way to invest in Bitcoin without having to directly participate in the cryptocurrency market.
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Investor flows into new Bitcoin spot ETFs since January have been nothing short of breathtaking. The two major Bitcoin ETFs have collectively amassed more than $25 billion in client assets in just over two months. And the new one Ark 21Shares Bitcoin ETF (NYSEMKT:ARKB) hasn’t fared too badly, with nearly $3 billion in assets under management. Sure, some of this money comes from small retail investors, but the lion’s share goes to institutional investors.
The big question, of course, is what fraction of their assets these institutional investors will choose to allocate to Bitcoin over time. Currently, the prudent allocation range is considered to be between 1% and 3%. But Wood believes this share will eventually rise well above 5%. This percentage would be high enough, he says, to push Bitcoin past the $1.5 million mark.
Bitcoin as a financial highway?
For Bitcoin to reach its full potential, however, something more is needed. From my point of view, it is highly unlikely that Bitcoin can reach $3.8 million if people accumulate it and hold onto it for life. People actually need to do something with their Bitcoin. In crypto jargon, Bitcoin must have some sort of utility.
That’s why Ark Invest has consistently focused on all the potential use cases of Bitcoin. From a macro perspective, growth in these use cases will drive greater demand for Bitcoin, which should support its price. In Ark Invest’s “Big Ideas 2023” report, the investment firm outlined eight key use cases for Bitcoin, projected their growth potential, and then aggregated the market size of each for the year 2030. It is so that Ark Invest arrived at its price target of $1.5 million. for Bitcoin.
The story continues
Rapid price appreciation can only happen, Wood says, if Bitcoin becomes a “financial superhighway” for the global banking and financial system. Building such a financial highway would be of particular importance, Wood says, for emerging market countries. So you can imagine a Bitcoin highway running through Latin America or connecting nations in sub-Saharan Africa.
While it sounds challenging, how realistic is this scenario? After all, Bitcoin remains a relatively slow proof-of-work blockchain, which was never designed to handle smart contracts. It is not as fast as other blockchains, it is not as energy efficient as other blockchains, and it is not as flexible or scalable as other blockchains. And this is why all the use cases originally envisioned for Bitcoin, such as the scenario that one day we will all pay for everything we buy with Bitcoin, have not come true.
From my point of view, it would be much better to build a financial highway using a super-fast, super-cheap blockchain like Solana (CRYPTO: G). Also Cardano (CRYPTO:ADA) might be a better choice, especially given the inroads it has made into sub-Saharan Africa. So I’m not as ready to embrace this financial superhighway vision of Bitcoin as I was to embrace former Vice President Al Gore’s “information superhighway” vision of the Internet.
How realistic is a $3.8 million price tag?
Bitcoin’s ability to reach a $3.8 million price target depends on its ability to continue to deliver historically high returns to investors. Working backwards and just doing some rough calculations, Bitcoin would need to deliver annualized returns of just over 100% to reach a price of $3.8 million by 2030.
Of course, Bitcoin has done this before. Over the 10-year period from 2001 to 2011, Bitcoin produced annualized returns of 230%, making it the best-performing asset in the world. And just last year, Bitcoin experienced an extraordinary performance of 150%. So I’m not saying Bitcoin can’t return 100% per year.
But, at some point, you have to lower your expectations and cut out some of the current Bitcoin ETF euphoria. While I remain very optimistic about Bitcoin’s prospects, I am also concerned that some of these price predictions are rising too high, too quickly.
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Domenico Basulto has positions in Bitcoin and Cardano. The Motley Fool has positions and recommends Bitcoin, Cardano and Solana. The Motley Fool has a disclosure policy.
This cryptocurrency could rise 5,300% by 2030, according to Cathie Wood of Ark Invest was originally published by The Motley Fool