In case you didn't know, Bitcoin (BTC -1.37%) is back. The granddaddy of cryptocurrencies lost more than 70% of its value between November 2021 and November 2022. However, it's nearly quadrupled since then.
Could Bitcoin keep this momentum going? Ark Invest founder Cathie Wood thinks so. She expects the red-hot cryptocurrency to soar by more than 5,600%. However, one active trader on Capitol Hill might seem to disagree with her.
Why Wood is so bullish on Bitcoin
Eleven investment firms won approval earlier in 2024 from the U.S. Securities and Exchange Commission (SEC) to offer spot Bitcoin exchange-traded funds (ETFs). Wood's Ark Invest was one of them. It now markets several Bitcoin-focused ETFs.
The inflow of money into these new ETFs offered by Ark Invest and others has boosted the demand for Bitcoin. Wood said at the Bitcoin Investor Day conference in March that the SEC's approval served as an "institutional green light." She added that Ark Invest believes that institutional investors will allocate a little over 5% of their portfolios to Bitcoin in the future. This could push Bitcoin's price to $3.8 million, according to Ark Invest's analysis.
There's also another reason why Wood likes Bitcoin over the short term: the cryptocurrency's halving. This halving occurs every four years or so. The most recent one took place on April 19.
Bitcoin skyrocketed after the previous halvings in 2012, 2016, and 2020. Wood predicted at the Bitcoin Investor Conference that this year's halving should provide a big catalyst too.
A Michigan congressman who recently sold crypto
Rep. Shri Thanedar, D-Mich., might not seem to share Wood's rosy outlook about Bitcoin. The congressman recently dumped his Bitcoin stake. Thanedar didn't even wait for the halving event; he sold on Feb. 5, 2024.
The Michigan Democrat didn't just sell one cryptocurrency. On the same day he sold Bitcoin, he also slashed his stakes in Ethereum and LiteCoin.
Has Rep. Thanedar become a crypto bear? It might look that way. However, the congressman stated in a phone conversation he remains bullish about crypto and has other funds invested in Bitcoin. Notably, his selling hasn't been limited to cryptocurrencies. Thanedar has aggressively sold several stocks in recent months, including Alphabet, Amazon, Apple, and Microsoft.
His selling extended beyond the so-called "Magnificent Seven" stocks as well. In January, Thanedar reduced his stake in Warren Buffett's Berkshire Hathaway too.
Bitcoin: Buy or sell?
Is Bitcoin a screaming buy or a sell? I'm somewhere in the middle of the spectrum.
I doubt that Wood's prediction of institutional investors parking over 5% of their portfolios in Bitcoin will happen. So far, the recent halving hasn't sparked a big rally for the cryptocurrency. On the other hand, I don't think investors should necessarily dump their positions in Bitcoin.
Buffett once referred to Bitcoin as "rat poison squared." The legendary investor is right that the cryptocurrency doesn't have intrinsic value in the same way that stocks do. However, a similar argument could be made about gold -- and investors have bought it for a long time. Because Bitcoin is only worth what people believe it's worth, though, it's easy to envision how it could be worth a lot more -- or a lot less -- in the future.
Editor's note: This article has been updated to clarify Rep. Shri Thanedar's stance on Bitcoin and other cryptocurrencies.
