Cathie Wood, CEO of Ark Invest, is well-known for her extreme price forecasts. In 2018, she famously predicted that Tesla would reach a pre-split price of $4,000, which represented a gain of over 1,000% at that time. Her prediction eventually came true. Now, Wood has caught the attention of Bitcoin (BTC -0.82%) investors with her ambitious prediction for the leading cryptocurrency. She believes that by 2030, Bitcoin will be worth $1.48 million per token in her bull case, or an increase of 33,557% as of Wednesday. In other words, $1,000 invested in Bitcoin today would be worth $34,557 by 2030, according to Wood.
That would be an impressive return, but early Bitcoin holders have already experienced such gains. To better understand Wood’s bull case for Bitcoin, let’s take a closer look.
Wood has long been optimistic about crypto. Coinbase is currently the largest holding of Ark Invest’s flagship Ark Innovation ETF, and its Ark Next Generation Internet ETF also provides exposure to Bitcoin through its ownership of Grayscale Bitcoin Investment Trust.
Wood believes that several different factors will drive the price up. She sees institutional adoption as a major catalyst, as Bitcoin is the latest asset class to gain adoption, similar to how emerging markets and real estate have earlier. She also believes that Bitcoin serves as an efficient hedge against inflation since it makes more sense for corporations to keep Bitcoin on their balance sheets rather than cash, which loses its purchasing power over time.
Wood also expects remittances to be a key market for Bitcoin, as it provides a way for people to send money across borders without worrying about currency swings or hyperinflation.
Is Cathie Wood right about Bitcoin?
Wood’s arguments sound reasonable, but it’s important to remember that Bitcoin has been around for almost 15 years. There are many inventions that are roughly the same age or younger than Bitcoin which have been more disruptive. Examples include the iPhone, home-sharing services like Airbnb, ride-sharing platforms like Uber, new social media apps like Instagram and TikTok, and electric vehicles such as Tesla. Most of those had a noticeable effect in a few years. Despite the hype around Bitcoin, its global adoption, beyond a speculative asset to buy and sell, has been minimal.
El Salvador is a country that has fully embraced Bitcoin, making it legal tender in 2021. However, adoption has been slow, hampered by limited internet access and lack of enthusiasm among Salvadorians. Even for remittances, which was Wood’s primary use case for Bitcoin, it has not seen much success. In the first six months of 2023, only around 1% of remittances were received in Bitcoin, according to the country’s central bank. Similar sentiments have been echoed by Remitly CEO Matt Oppenheimer, who said that while the company could enable transfers in Bitcoin or any other cryptocurrency, “we’re not seeing customer demand for it.”
Regarding institutional adoption, few mainstream companies are currently holding Bitcoin, and some of the world’s most respected financiers have repeatedly slammed it. Warren Buffett has called it “rat poison squared,” and JPMorgan Chase CEO Jamie Dimon said recently that he would “close it down” if he were the government, arguing that the only true use case for crypto is “criminals, drug traffickers, money laundering, tax avoidance.”
The argument that Bitcoin is a good hedge against inflation has also not been proven. In fact, the opposite has been true. Inflation, according to the Consumer Price Index, peaked last June at 9% – yet Bitcoin crashed in 2022 along with the stock market. Historically, Bitcoin has traded like a high-risk asset, rather than a safe-haven from inflation, the way gold traditionally has. Without fundamentals, Bitcoin is mostly driven by momentum, which explains much of its recent gains, as well as hopes for a Bitcoin exchange-traded fund (ETF).
Will Bitcoin reach $1 million?
Wood’s price target would result in huge gains for Bitcoin, but it’s illogical to have a target price on a cryptocurrency. Even price targets on stocks, which represent the earnings and valuations of a real business, are rarely accurate, and predicting movements in cryptocurrency is even more difficult.
Anything can happen with the leading cryptocurrency and adoption could grow, but Bitcoin has already achieved 100% brand recognition and most people have concluded that it’s not useful for them. Bitcoin bulls, therefore, need to ask themselves what new opportunities will arise for the cryptocurrency that it hasn’t had before. Institutional investors are largely ignoring it, immigrants are not interested in sending money with it, and it’s not treated as an inflation hedge the way you would expect “digital gold” to be. El Salvador’s experiment with Bitcoin has not been very encouraging.
At this point, the most likely change seems to be increased regulation, such as the Digital Asset Anti-Money Laundering Act, which is now going through Congress. This is not likely to be favorable for Bitcoin or the rest of the cryptocurrency world.
It’s easy to get excited about outlandish price targets like Wood’s, but even Bitcoin bulls should be realistic about the challenges that stand in the way of further gains.
