The rise of Bitcoin (BTC 4.57%) over the last decade has led high profile financial luminaries to expose their stance on the burgeoning asset. Cathie Wood, CEO of Ark Invest, is one of the most vocal supporters. Her investment firm catapulted into the spotlight in 2020 as a result of the success of the Ark Innovation ETF (ARKK 0.54%).
In one of the most bullish estimates around, the firm called for Bitcoin to reach $500,000 by 2026 just last September. Even better, she recently doubled down in January when she predicted that one Bitcoin would be worth $1,000,000 or more by 2030.
What is she thinking?
For Bitcoin to reach a $1,000,000 price tag it would need to go up nearly 2,000% in a little under eight years. This doesn't look too crazy when considering it is up about 3,500% since 2017. If Bitcoin is to reach these levels, much has to change and current trends must amplify.
Cathie Wood and her firm arrived at these estimates after composing multiple research papers that took one of the most comprehensive, in depth evaluations on the current and future state of Bitcoin. This research highlights a multitude of macro and microeconomic factors that led Cathie and her team to the million dollar hypothesis.
At a recent interview in Miami at the Bitcoin Conference, Wood was questioned for the first time about her reasoning. A few of her key points stood out.
Of most importance was Bitcoin's new-found political support. She referenced Janet Yellen (Secretary of the Treasury) and Gary Gensler (Chairman of the SEC) in particular. Wood credited Gensler as the driving force behind the 180 degree turn of Yellen's previous anti-crypto sentiment. She thinks Gensler will have more success persuading other politicians due to his background as an MIT cryptocurrency professor.
She surmised that Bitcoin will become a hot topic for voters in upcoming elections. Wood claimed that it wouldn't surprise her if political candidates ran entire campaigns on supporting Bitcoin and crypto in general. In her typical candid fashion, Wood laughed that when considering how wide the political divide has become recently, of all things, Bitcoin now has bipartisan support.
Another topic was the increased accessibility of Bitcoin in the United States. Wood directly referenced the innovation and integral role of Bitcoin's Layer 2 scaling solution, the Lightning Network, for bringing more users to Bitcoin domestically. Payment apps like CashApp have utilized the Lightning Network to onboard millions of users to the Bitcoin network.
In general, Wood believes there is "an incredible number of use cases and Bitcoin is leading the charge." Opportunities abound for Bitcoin to be used as a hedge against government manipulation of currencies in developing markets. She thinks that more high net worth individuals will use Bitcoin as an insurance policy against their wealth being confiscated by governments. And lastly, just like her firm, she said that institutional investors will continue purchasing Bitcoin slowly but surely.
Trust the professionals
Ark Invest has done its due diligence, and just like Babe Ruth, Cathie Wood has called her shot. Their business model depends on them being right about these kinds of things.
Let's say Cathie Wood is only half right, or a quarter right. If Bitcoin were to rise to those prices it would still be one of the greatest appreciating assets of our generation. Short term price fluctuations for Bitcoin do not matter in the grand scheme of things. The year 2030 will be here before we know it and that fits perfectly into the age-old investment strategy of buy and hold.