As her firm’s flagship fund, the ARK Innovation ETF, surged 148.7% during 2020, Cathie Wood rose to prominence as a widely followed voice in the investment community. Bets on major pandemic winners like Block, Teladoc, and Zoom paid off well but have since cooled off as a result of the current uncertain macroeconomic situation. Nonetheless, people pay a great deal of attention to what Wood says about stocks and investments.
The renowned investor, whose firm focuses on disruptive and innovative companies, recently reiterated her bullishness on Bitcoin (BTC -0.81%) in particular. And investors should take notice.
As bullish as ever
At the recent SALT Conference in New York, where investment professionals and policy makers get together to discuss a host of topics like alternative investments, healthcare, and sustainability, Cathie Wood spoke on stage about her belief in the promise of cryptocurrencies and blockchain technology. And to be specific, she cited Bitcoin as a huge winner over the rest of the decade, once again expressing more confidence in her belief in the world’s most valuable cryptocurrency.
Wood also talked about how Bitcoin and cryptocurrencies have started to behave more like growth tech stocks as a result of investors putting them all in the same bucket of risky assets. And the aggressive interest rate hikes by the Federal Reserve, to curb soaring inflation, has put downward pressure on their valuations.
Bitcoin’s price drop of 59% in 2022 (as of this writing) might one day prove to be an extremely favorable buying opportunity for long-term investors, Wood believes.
Bitcoin has massive upside
Earlier this year, Ark Invest laid out the bullish case for Bitcoin in its Big Ideas 2022 report, which Wood spoke about at the SALT conference. The firm believes, according to its analysis, that Bitcoin’s price could exceed $1 million per coin by 2030. That’s quite a lofty target, but it hinges on Bitcoin achieving a certain level of penetration in eight different use-cases.
If Bitcoin’s network captures half of the global remittance market, that’s $300 billion in value. If Bitcoin commands 10% of the money supply in emerging economies (excluding the four biggest countries) by 2030, that’s $2.8 trillion. And if 25% of settlement volume between U.S. banks shifts to Bitcoin, that would create another $3.8 trillion in value.
Besides these three instances of actual utility, Ark sees Bitcoin becoming a mainstream asset for government treasury reserves, high-net-worth individuals, institutional investors, and corporate balance sheets at minor allocations. What’s more, Wood’s firm sees Bitcoin taking 50% of gold’s market cap by 2030. Add these scenarios up, and that’s another $21.6 trillion in value accruing to the Bitcoin network.
Based on the crypto’s market cap of $375 billion as of this writing, Ark’s target valuation of $28.5 trillion would equal a more than 70-fold gain between now and the end of the decade. This incredible hypothetical performance would without a doubt beat the S&P 500‘s total return during the same time, and it would make those investors who closely follow Cathie Wood’s words rich.
But putting your entire portfolio into Bitcoin would be a risky move, because the technology is still early in its adoption and development. Plus, it’s incredibly volatile. Therefore, it’s best to allocate to Bitcoin what you can afford to lose, say no more than 3% of your portfolio. By keeping the allocation that low, it will help investors sleep better at night. And if Bitcoin skyrockets, it will certainly have a major positive impact on the financial well-being of those who were bold enough to buy and hold over the years.
Neil Patel has positions in Bitcoin, Block, Inc., and Teladoc Health. The Motley Fool has positions in and recommends Bitcoin, Block, Inc., Teladoc Health, and Zoom Video Communications. The Motley Fool has a disclosure policy.