Ark Invest CEO Cathie Wood is known for her wild price targets. In 2018, she famously predicted that Tesla would hit a pre-split price target of $4,000, representing more than a 1,000% gain at the time, and that prediction came true.
Now, Wood has caught the attention of Bitcoin (BTC +3.02%) bulls with a splashy price target on the leading cryptocurrency. The renowned disruptive growth investor sees Bitcoin hitting $1.48 million per token by 2030 in her bull case for the cryptocurrency, or a gain of 33,557% as of Wednesday afternoon. In other words, $1,000 invested in Bitcoin today would be worth $34,557 by 2030, according to Wood.
That would be an astronomical return, but early Bitcoin holders have already experienced such gains. Can Bitcoin deliver those kinds of returns again? Let's take a closer look at Wood's bull case for Bitcoin.
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Cathie Wood's Bitcoin thesis
Wood has long been bullish on crypto. Coinbase currently makes up the biggest holding of Ark Invest's flagship Ark Innovation ETF, and its Ark Next Generation Internet ETF also offers exposure to Bitcoin through its ownership of Grayscale Bitcoin Investment Trust.
As far as her Bitcoin target, Wood has argued that a number of different factors will drive the price higher. First, she sees institutional adoption pushing Bitcoin's price higher and expects it to be the latest new asset class to gain adoption the way emerging markets and real estate have earlier. She also sees it as an obvious hedge against inflation. It makes more sense for corporations to hold Bitcoin on their balance sheets, rather than holding cash, which loses its purchasing power over time.
As far as utility, Wood expects remittances to be a major market for Bitcoin as well, arguing that sending money across borders with Bitcoin would protect populations from currency swings and hyperinflation.
Is Cathie Wood right about Bitcoin?
Wood's arguments sound logical, but there are a few things investors should remember before jumping on the bandwagon here. Bitcoin has been around for nearly 15 years, created in early 2009 by the anonymous Satoshi Nakamoto.
There are plenty of innovations that are roughly as old as Bitcoin or younger that have been much more disruptive than it has. Those include the iPhone, Airbnb-style home-sharing, ride-sharing platforms like Uber, new social media apps like Instagram and TikTok, and electric vehicles, led by Tesla. Most of those had a noticeable effect within just a few years. Despite all the hype around Bitcoin, its adoption around the world as something more than a speculative asset to hold and trade has been mostly negligible.
No country more fully embraced Bitcoin than El Salvador, which has long used U.S. dollars in place of its own currency and made the cryptocurrency legal tender in 2021. However, adoption has been slow in the small Central American country, impeded by limited internet access and a lack of enthusiasm among Salvadorians. Even remittances, Wood's primary use case of Bitcoin, have not gained traction. Through the first six months of 2023, only around 1% of remittances were received via Bitcoin, according to the country's central bank.
Similarly, Remitly CEO Matt Oppenheimer said in a 2022 interview that his company, which processed over $10 billion in remittances in its most recent quarter, could facilitate transfers in Bitcoin or another cryptocurrency but "we're not seeing customer demand for it." Oppenheimer noted problems like "[t]he volatility, the lack of trust, and the lack of security" that have stood in the way of Bitcoin adoption for remittances.
Regarding Wood's other arguments, institutional adoption seems far from a foregone conclusion. Few mainstream corporations are now holding Bitcoin, and some of the world's most admired financiers have repeatedly trashed it. Warren Buffett, for example, has called it "rat poison squared," and JPMorgan Chase CEO Jamie Dimon said recently he'd "close it down" if he were the government, arguing that the only true use case for crypto is "criminals, drug traffickers, money laundering, tax avoidance."
Finally, the argument that Bitcoin is a good hedge against inflation simply has not been borne out. In fact, the opposite has been true. Inflation, according to the Consumer Price Index, peaked last June at 9% -- yet Bitcoin crashed in 2022 along with the stock market. Historically, Bitcoin has traded like a high-beta risk asset, rather than a safe haven from inflation, the way gold traditionally has. Without fundamentals, Bitcoin trades mostly on momentum, which explains much of its recent gains, as well as hopes for a Bitcoin exchange-traded fund (ETF).
CRYPTO: BTC
Key Data Points
Will Bitcoin reach $1 million?
Wood's price target would translate into huge gains for Bitcoin, but the idea of having a reachable price target on a cryptocurrency is a bit illogical. Even price targets on stocks, which represent the earnings and valuations of a real business, are rarely accurate, and predicting movements in cryptocurrency is even more difficult.
Anything could happen with the leading cryptocurrency, and adoption could increase, but at this point, Bitcoin is already a household name. It's reached 100% brand awareness and has had that for several years. Most people have concluded that it doesn't have any utility for them.
Bitcoin bulls like Wood, therefore, need to ask themselves what new opportunities are going to arise for the cryptocurrency that it hasn't had previously. Institutions are largely ignoring it. Immigrants aren't interested in sending money with it, and it's not treated like an inflation hedge the way you would expect "digital gold" to be. El Salvador's experiment with Bitcoin has hardly been encouraging.
At this point, the most likely change seems to be increased regulation, including the Digital Asset Anti-Money Laundering Act, which is now going through Congress. That is unlikely to be bullish for Bitcoin or the rest of the cryptocurrency universe.
It's easy to cheer outlandish price targets like Wood's, but even Bitcoin bulls should be clear-eyed about the obstacles standing in the way of further gains.
