Nearly two years ago, Cathie Wood of Ark Invest famously predicted that Bitcoin (BTC -0.06%) would reach a price of $1 million by 2030. That was well before Bitcoin ever broke through the $100,000 price level, and well before the launch of the new spot Bitcoin exchange-traded funds (ETFs) in January 2024. The prediction came when Bitcoin was emerging from the crypto winter of 2022, and its prospects looked uncertain at best.
In a recent interview with Bloomberg, Wood reiterated that Bitcoin is headed to $1 million by 2030. In fact, if everything goes according to plan, she says, it might even reach $1.5 million. Why is Wood so bullish on Bitcoin?
The scarcity of Bitcoin
The primary factor driving Bitcoin's surging price, says Wood, is its inherent scarcity. According to the Bitcoin algorithm, its total lifetime supply is capped at 21 million coins, and 19.8 million coins are already in circulation.
At this point, says Wood, Bitcoin is even more scarce than gold. The supply of Bitcoin is carefully controlled by its algorithm, and there's no way to crank up its production, as you can with gold.
Growing demand for Bitcoin
That limited supply is important because the demand for Bitcoin is rising. Everyone is suddenly racing to own Bitcoin, and that demand will help boost Bitcoin's price, given its relatively fixed supply.
CRYPTO: BTC
Key Data Points
To come up with her original $1 million price prediction for Bitcoin, Wood deployed a building block model for estimating its future price. According to Ark Invest, several different building blocks are driving Bitcoin demand.
One of these building blocks is demand from institutional investors, who are choosing to allocate more of their portfolios to Bitcoin. Now that the spot Bitcoin ETFs are available to investors, institutional investors have a useful tool for calibrating their precise exposure to Bitcoin. In her original model, she used a base case allocation of 2.5% for Bitcoin. In a best-case scenario, she says, institutional investors might choose to allocate as much as 6.5% of their portfolios to Bitcoin.
Another building block is the growing demand for Bitcoin as a long-term store of value. Until recently, the idea of substituting "digital gold" (i.e., Bitcoin) for physical gold had not really taken off. But now, more investors are buying into the idea of Bitcoin as a hedge against inflation.
Image source: Getty Images.
Another building block is something that Wood refers to as "nation state treasury," which is demand coming from central banks and sovereign governments. Across the world, nation states are contemplating holding Bitcoin as a reserve asset.
The most recent example of this is President-elect Donald Trump's campaign promise to create a strategic Bitcoin reserve for the United States. According to the current outline of that plan, the U.S. government will commit to buying 1 million Bitcoins over a five-year period, with a suggested holding period of 20 years. Several U.S. states -- including Texas, Florida, and Pennsylvania -- have also said they would create strategic Bitcoin reserves of their own, so the momentum for government ownership of Bitcoin continues to build.
Is a $20 trillion market cap possible?
Simply put, a $1 million price tag for Bitcoin implies a future market cap of more than $20 trillion. That would easily make Bitcoin the most valuable digital asset in the world. This would imply a higher valuation for Bitcoin than any tech stock by a significant margin. Currently, the most valuable tech stock in the world is Apple, with a valuation of $3.7 trillion.
A lot needs to go right for Bitcoin to hit a market cap of $20 trillion. As we've seen from Bitcoin's recent pullback from the $100,000 price level, even the faintest hint of concern from the Federal Reserve can be enough to send the price of Bitcoin retreating. Plus, given that it's not clear how Trump will follow through on his pro-crypto promises, you can understand why some investors remain skeptical about Bitcoin.
But here's the thing: It's impossible to ignore the growing demand for Bitcoin coming from retail investors, institutional investors, corporations, and governments. That's why I remain bullish about Bitcoin's long-term trajectory. There's simply too much demand chasing too little supply, and that should push prices higher over the long haul.
