People listen when a veteran investor who has $60 billion under management makes a prediction. Cathie Wood, founder and CEO of Ark Invest, remains bullish on Bitcoin (BTC). She even went further and described the number one cryptocurrency as an insurance policy to protect purchasing power and wealth. Miss Wood and Ark Invest are banking that each BTC could be worth more than a million dollars in the next decade.
This is a stark contrast when compared to Bitcoin naysayers like CNBC Host Jim Cramer. Cramer, who does not hold his punches when it comes to cryptocurrency, is advising his audience to get off the crypto space.
But is Ark Invest correct in its prediction? The company released the 2023 Big Ideas research report. The paper, which started in 2017, aims to enlighten investors on the long-term impact of innovations. It highlights how current technological breakthroughs create the potential for future growth. Let us check their thesis.
Bitcoin has Outperformed Every Major Asset Class
Bitcoin, the first and largest cryptocurrency by market capitalization, has seen significant growth and outperformed traditional assets such as stocks, bonds, and commodities since its inception in 2009. It has experienced several bull runs, with its price increasing from a few cents to an all-time high of more than $60,000.
The report is saying that Bitcoin has experienced five drawdowns since its creation, but has still delivered positive annualized returns over 3, 4, and 5-year time horizons. This simply means that the number one digital asset has given good returns for long-term holders.
Institutions are Investing in Bitcoin During a Bear Market
The table above shows that major financial institutions are getting into Bitcoin despite its lackluster performance in 2022. They understand that it is best to keep on building and investing while waiting for the bull market to start.
- Blackrock’s Aladdin Clients now have direct access to Bitcoin and crypto through Coinbase Prime. Blackrock is the world’s largest asset manager with more than $10 Trillion under management. This move can potentially usher in billions if not trillions of dollars into the crypto space.
- BNY Mellon, the world’s largest custodian bank, is now accepting select clients’ Bitcoin and Ethereum Deposits. This move is significant since BNY Mellon is a symbol of stability and its acceptance of crypto is a milestone toward institutional adoption.
- ARK Invest Management worked with cryptocurrency-focused technology provider Eaglebrook Advisors to make two digital asset investment strategies available to advisors. This partnership also offers 2 actively managed digital assets portfolios to the wealth management industry.
- Fidelity, one of the financial service corporations, is now offering Bitcoin and Ethereum trading to its customers. This is a good development since Fidelity has trillions of dollars that could potentially be infused into the crypto space.
Bitcoin has the Potential to Reach $1 Million by 2030
The table above shows the company’s Bitcoin price estimates. According to Ark’s research, we are looking at a potential low price of $258, 500 to a high of $1.48 Million by 2030. There have been several price predictions for Bitcoin and a lot of them did not materialize. Even Ark Invest’s disclaimer is saying that these estimates are not to be considered investment advice.
These predictions are based on the premise that Bitcoin’s use case will increase. BTC has always been called digital gold and store value. It is often predicted that Bitcoin will replace gold as the preferred store of value. Gold’s estimated market cap is 12.4 Trillion Dollars. While Bitcoin’s market cap is currently at more than $400 Billion.
Let us do a quick mathematical exercise. What if Bitcoin manages to get half of gold’s market capitalization? Then Bitcoin’s present market cap will increase to nearly $7 trillion. Seven Trillion divided by 21 Million is $333,333. This number is somewhere in between Ark’s bear case and base case scenario. But we have to remember that the market cap doesn’t necessarily have to come exclusively from gold. It could also come from other sectors.
BTC as Insurance
Cathie Wood said in her Bloomberg interview that Bitcoin protects people from the implosion of purchasing power and wealth. It also protects wealth from confiscation.
Miss Wood’s words are the same reasons why Satoshi Nakamoto created Bitcoin. It is to take the power from centralized finance and put it in the hands of the common person. It is mathematically designed to be the antithesis of the unabated printing of money that devalues wealth and purchasing power. Its 21 million supply limit ensures its scarcity which will prop up its value over time.
Since Bitcoin can be stored in noncustodial wallets, it is also resistant to censorship and confiscation. The only way somebody can get their hands on your stash is by forcibly taking your private keys.
An Insurance and Store of Wealth
Inflation has been eating away at consumers’ purchasing power. You only have to go to the grocery store and look at the prices of goods. A hundred dollars won’t buy as much food as compared to a couple of years ago. By now, people are understanding that their money loses value every time central banks decide to print more money out of thin air.
Ordinary individuals cannot influence a country’s monetary policy, but they can always decide to procure Bitcoin. Nobody can stop the central bank’s money printing, but anybody can slowly accumulate wealth by buying a few Satoshis regularly.
Ark’s prediction might or might not happen. Nobody has a crystal ball, so all of these are just intelligent guesses based on their research. Unless we could travel forward in time, we can not be certain if Bitcoin will reach one million dollars. What is certain is that fiat will keep on losing value to inflation and having insurance is not a bad idea.
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