Ark Invest is an asset management company focused on disruptive innovation. Under CEO Cathie Wood, the company manages thematic exchange-traded funds (ETF) built around various technologies, including blockchain and cryptocurrency.
Ark has long been bullish on Bitcoin (BTC -1.65%). In 2015, it became the first public fund manager to gain exposure to the cryptocurrency, which traded around $200 at the time. Nearly a decade has passed, and Bitcoin is now worth $70,000, but Wood and her team still see substantial upside for investors.
The company published a Bitcoin valuation model in 2023 that posited a price of $1.5 million by 2030. That implies more than 2,000% upside from its current price. But Ark quietly revised its target higher after the Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January 2024. Wood made that information public at the Bitcoin Investor Day conference last month, saying:
Last year, we put out our bull case for Bitcoin. It was $1.5 million. With this institutional green light that the SEC has provided, kicking and screaming though it did, the analysis we've done is that if institutional investors were to allocate a little more than 5% of their portfolios to Bitcoin, as we think they will over time, that alone would add $2.3 million to the projection I just gave you.
In short, Ark now believes Bitcoin could reach $3.8 million, presumably by 2030, though Wood didn't provide a specific time frame. The upside implied by the new target exceeds 5,300%. One way investors can capitalize on that is by purchasing a position in the iShares Bitcoin ETF (IBIT -1.72%), a recently approved spot Bitcoin exchange-traded fund.
Why the iShares Bitcoin ETF is worth consideration
Until recently, getting direct Bitcoin exposure was a cumbersome and costly process for U.S. investors. They had to create and fund an account with a cryptocurrency exchange, where they usually had to pay exorbitant commissions on each transaction. For instance, Coinbase charges about 1.5% for simple trades. Additionally, investors who wanted complete control of their Bitcoin had to move the cryptocurrency to a specific type of blockchain wallet.
Fortunately, things got easier when the SEC approved spot Bitcoin ETFs in January. Those investment vehicles track the price of Bitcoin while eliminating the hassle of cryptocurrency exchanges, high fees, and specialized storage solutions. Ark highlighted those benefits in a recent report:
The launch of spot Bitcoin ETFs set the stage for Bitcoin's growth by offering investors a more direct, regulated, and liquid way to gain exposure. Bitcoin spot ETFs are traded on major stock exchanges, allowing investors to buy and sell shares through their existing brokerage accounts, and should reduce the learning curve and operational complexities associated with direct investments in Bitcoin.
The SEC has approved 11 spot Bitcoin ETFs, all of which do the same thing: track the price of Bitcoin. The only consequential differences lie in the expense ratios and the reputations of the issuers.
With that in mind, investors should consider the iShares Bitcoin ETF from BlackRock. It bears the third-lowest expense ratio of 0.25%, and BlackRock has a sterling reputation that comes with being the world's largest asset manager.
Investors shouldn't count on Bitcoin reaching $3.8 million
Ark Invest believes spot Bitcoin ETFs will eventually capture more than 5% of institutional assets under management (AUM). For context, consultancy PwC believes institutional AUM will reach $145 trillion by 2025. Using that figure, Ark's prediction implies that institutional investors will eventually allocate about $8 trillion to Bitcoin. That may be a stretch.
On one hand, the launch of spot Bitcoin ETFs has undoubtedly been a success. The ETFs issued by BlackRock and Fidelity saw more inflows during their first month on the market than any other ETFs in history, according to Eric Balchunas at Bloomberg. Additionally, the BlackRock ETF became the fastest ever to reach $10 billion in assets, according to The Wall Street Journal.
On the other hand, spot Bitcoin ETFs had collectively accumulated just $57 billion in assets as of April 4, according to The Block. Even if every penny came from institutional investors, which is certainly not true, that figure would need to increase 140-fold to reach $8 trillion. I doubt that will happen in the near future, so readers should not bank on Bitcoin reaching $3.8 million any time soon.
That said, the iShares Bitcoin ETF is still a worthwhile purchase for risk-tolerant investors. Bitcoin easily outperformed stocks, bonds, gold, commodities, and real estate over the last five years. Additionally, any investor who has bought and held Bitcoin for at least five years has profited, no matter when they made their purchase, according to Ark Invest. That makes for a compelling investment thesis.
