On April 2, U.S. President Donald Trump announced plans to impose a sweeping 10% tariff on all goods imported into America, in addition to a series of much higher "reciprocal" tariffs on specific countries. Risk assets like stocks and cryptocurrencies plummeted on fears of an abrupt slowdown in the global economy, but the president has now placed a 90-day pause on some of the reciprocal tariffs, which has stabilized the markets.
Digital products, services, and assets were mostly exempt from the tariffs, which meant cryptocurrencies were fundamentally unaffected. But that didn't stop them from declining amid the broader turmoil, as investors ditched them in favor of safe havens like cash. Even Bitcoin (BTC 1.23%), which is the world's largest cryptocurrency with a market capitalization of $1.6 trillion, tumbled by as much as 10% after April 2.
Ark Investment Management, which was founded by seasoned tech investor Cathie Wood, thinks Bitcoin could reach a price of $1.48 million by 2030, which implies a potential upside of 1,715%. Tensions between America and its trading partners could persist for the foreseeable future, and since Ark thinks that Bitcoin will be mostly immune to the long-term fallout, it might be a good addition to a traditional investment portfolio. Here's what investors need to know.
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Bitcoin has delivered spectacular returns over the past decade
Bitcoin's true value is very difficult to nail down. It doesn't produce any revenue or earnings, so it can't be valued using traditional methods that apply to stocks and other assets. But some investors have compared it to a digital version of gold because of its scarcity and decentralized nature.
Bitcoin has a total supply of 21 million coins, and that figure can't be altered by any person, company, or government. The coins are earned through a process called "mining," and a verifiable system of record called the blockchain keeps track of every transaction. Because of these unique qualities, the U.S. Securities and Exchange Commission (SEC) has even approved dozens of Bitcoin exchange-traded funds (ETFs), which provide financial advisors and institutional investors with a safe, regulated way to invest in the cryptocurrency.
You might be wondering why anyone would want to invest in a digital version of gold when they can buy real gold. Well, Bitcoin has soared by an eye-popping 35,300% over the past decade alone, crushing every other asset class, including stocks, real estate, and gold itself.
Bitcoin Price data by YCharts.
Ark predicts further upside of 1,715% by 2030
Bitcoin is trading at a price of $81,500 as of this writing. Cathie Wood's Ark Invest issued a report in 2023 which suggests it could soar to $1.48 million by 2030 based on eight factors, but the following four make the most sense in my opinion:
- Corporate Treasury: Ark believes more companies will eventually store Bitcoin on their balance sheet alongside their cash and other assets, because it might help them hedge against inflation and other economic headwinds.
- Nation-state Treasury: Similarly, Ark thinks governments will also add Bitcoin to their reserves the same way they own stockpiles of gold. President Trump established a Strategic Bitcoin Reserve for the U.S. government earlier this year, so it's plausible that other countries might follow.
- Institutional investment: Given its incredible returns, Ark predicts that institutional investors will eventually allocate somewhere between 1% and 6.5% of their entire asset base to Bitcoin. The widespread availability of ETFs could pave the way for this to happen.
- Digital gold: I touched on this earlier, but Ark believes investors could move between 20% and 50% of their usual gold allocation to Bitcoin instead. It's a logical idea, since Bitcoin is digital and far more portable, which makes it easier to own.
Below are two more of the eight factors that hold a little less water in my view:
- Seizure-resistant asset: Ark thinks high net-worth individuals will buy an increasing amount of Bitcoin because it's harder for governments to confiscate compared to cash, real estate, and other assets. But this isn't really true, because the U.S. government alone is currently holding over 207,000 Bitcoin which it seized from criminals and bad actors.
- Emerging market currency: Ark predicts that some countries will adopt Bitcoin as their national currency because it can't be printed or debased. El Salvador was the first country to try this experiment, but it hasn't gained much traction, potentially because of the cryptocurrency's volatility.
Nevertheless, if Bitcoin does reach a price of $1.48 million like Ark expects, investors who buy it today could earn a whopping 1,715% return over the next five years.
CRYPTO: BTC
Key Data Points
Bitcoin is still a speculative investment
As attractive as Ark's prediction sounds, investors must remember that Bitcoin is still a highly speculative investment because it doesn't produce revenue or earnings. Plus, it's important to put the forecast into perspective -- if Bitcoin did rise to $1.48 million, its fully diluted market capitalization would be $31 trillion.
That would make Bitcoin 10 times more valuable than the world's largest company, Apple, which is currently worth $3 trillion. Furthermore, $31 trillion is much higher than the total value of all above-ground gold reserves, which currently stands at $21 trillion. Therefore, Ark's prediction might seem ambitious for investors who solely view Bitcoin as a digital version of gold.
Nevertheless, if Bitcoin's market cap did rise to match the market cap of gold, that would translate to a price of $1 million per coin, which still implies a 12-fold return from where it trades as of this writing.
Considering the current economic and political climates, investors could benefit from allocating a small percentage of their portfolios to Bitcoin. Since it's a digital asset, isn't owned or operated by any company, and isn't imported, it technically can't be tariffed. Governments could impose other fees and charges on consumers who buy and sell Bitcoin, but they wouldn't be very effective in swaying trade negotiations because the cryptocurrency doesn't specifically belong to any one country. As a result, I predict it will probably be left alone.
The bigger risk to Bitcoin in the short-term is that tariffs and trade tensions continue to damage investor sentiment toward risk assets, which would drive its price lower. But even with a portfolio allocation of just 1%, investors could still do extremely well if Bitcoin climbs toward Ark's long-term target over the next few years, while shielding themselves from a significant financial loss if it heads south instead.
