Cathie Wood is the chief executive officer of ARK Investment Management, which operates several exchange-traded funds (ETFs) focused on disruptive technologies. Cryptocurrencies are an area of focus for ARK, and it was one of the first firms to receive approval from the Securities and Exchange Commission (SEC) to launch a Bitcoin (BTC -0.74%) exchange-traded fund (ETF) last year.
Bitcoin is the world's largest cryptocurrency by market value, and ARK is extremely bullish about its future. In 2024, the firm issued a forecast that suggested the crypto could reach $1.5 million by 2030, implying a potential upside of 1,276% from its current price of $109,000 as of this writing.
But last month, ARK released a new report with a fresh set of predictions and revised its bull case to $2.4 million per coin by 2030, which implies it could soar by 2,101% instead. But how realistic is that target?
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A unique asset
Had you invested $1,000 in Bitcoin 10 years ago, it would be worth $451,600 today. The same investment in the S&P 500 index would have grown to just $2,730 over the same period. It now has a market capitalization of $2.18 trillion, so if it were a company, it would be the fourth largest in the world.
The digital coin has a unique set of qualities differentiating it from most other investible assets, and even most other cryptocurrencies. It's completely decentralized, so it can't be controlled by any person, company, or government.
It's also scarce thanks to a fixed supply of 21 million coins -- 19.8 million of which are in circulation (the rest will be slowly mined by about 2140). Lastly, it's built on a secure system of record called the blockchain, where transactions are publicly verifiable.
With that said, Bitcoin doesn't produce any revenue or earnings, nor is it very useful as a currency because of its extreme volatility, so it's still a highly speculative asset. It's more like a digital version of gold than a stock or the U.S. dollar, so further upside is contingent on the willingness of other investors to continually pay a higher price.
ARK points to three primary catalysts that could drive further upside
In ARK's new April report, it highlighted six catalysts to support its $2.4 million price target. But it pointed to three of them as primary catalysts, meaning they will have a much larger influence on the price between now and 2030:
- Institutional investment: ETFs enable financial advisors and institutional investors to own Bitcoin in a safe and regulated manner. Previously, they needed to use digital crypto wallets, which can be susceptible to hacks and irrecoverable losses. ARK says institutional investors will have about $200 trillion in assets under management by 2030, and predicts 6.5% of that figure could flow into Bitcoin thanks to ETFs.
- Digital gold: As I mentioned earlier, the crypto is often thought of as a digital version of gold, except it's easier to transfer ownership, which could make it more attractive in the contemporary economy. As a result, ARK thinks 60% of the money that is currently allocated to gold could be shifted into Bitcoin by 2030 instead.
- An emerging-market currency: Developing countries tend to have volatile currencies, which drastically affects their citizens' purchasing power. ARK believes the digital coin could be the ultimate safe asset to help these nations hedge against inflation and other economic headwinds.
According to ARK's modeling, these three catalysts will contribute 92.5% of the value in the firm's $2.4 million price target. If it proves to be accurate, investors who buy the crypto today would earn a 2,101% return by 2030.
But is a $2.4 million target achievable?
If we take ARK's $2.4 million target and multiply it by Bitcoin's total supply of 21 million coins, we get a market capitalization of $50.4 trillion. In other words, the cryptocurrency would be 15 times more valuable than the world's largest company, Microsoft, which has a market cap of $3.4 trillion today. Moreover, it would be worth more than the entire annual output of the U.S. economy, which was $29.7 trillion last year.
To me, that doesn't sound realistic for an asset with no revenue, no earnings, and no proven use case. Plus, Bitcoin ETFs have only attracted about $134 billion in inflows since the SEC started approving them in January last year, and ARK's forecast relies on that figure reaching a staggering $13 trillion by 2030 (or $2.6 trillion per year for the next five years). Based on the evidence so far, that doesn't seem likely.
Even if investors consider the digital token to be a viable alternative to gold, humans have used the precious metal for thousands of years, and the value of all above-ground reserves is just $22.5 trillion today. If the crypto's market cap rose to match gold's market cap, it would translate to a price per coin of $1.07 million which is still well short of ARK's target.
In summary, I think ARK's $2.4 million price prediction for Bitcoin is a little ambitious. The cryptocurrency might continue to trend higher from here, but investors should probably temper their expectations because the best returns might be in the rearview mirror.
