Cathie Wood, the founder and CEO of Ark Invest, is bullish on cryptocurrencies. ARK’s flagship ETFs — ARK Innovation (ARKK -1.06%), ARK Next Generation Internet (ARKW -0.94%), and ARK Fintech Innovation (ARKF -1.11%) — all hold shares of crypto stocks such as Coinbase and Robinhood. Its ARK 21Shares Bitcoin ETF (ARKB -2.40%) gives investors direct exposure to Bitcoin (BTC -1.92%).
Wood claims Bitcoin, which currently trades at about $79,000, could soar nearly 1,480% to $1.25 million within the next five years. That rally would boost Bitcoin’s market cap from $1.6 trillion to $25.1 trillion. For reference, gold — the world’s most valuable asset — currently has a market cap of $31.3 trillion. Let’s see what it would take for Bitcoin to generate those massive gains.
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What’s the bull case for Bitcoin?
Bitcoin is the world’s largest cryptocurrency, and it’s still mined with the energy-intensive proof-of-work (PoW) consensus mechanism. Every four years, a scheduled “halving” halves its mining rewards and makes it more difficult to mine profitably.
More than 20 million of Bitcoin’s maximum supply of 21 million tokens have already been mined. That scarcity, which will intensify until the last Bitcoin is mined in 2140, makes Bitcoin more comparable to gold and silver than other cryptocurrencies. That’s why the Securities and Exchange Commission (SEC) classified it as a digital commodity before other cryptocurrencies. That classification paved the way toward the approval of its first spot price ETFs in early 2024.
Today’s Change
(-1.92%) $-1,560.23
Current Price
$79,622.00
Key Data Points
Market Cap
Day’s Range
$78706.00 – $81379.00
52wk Range
$57945.16 – $126079.89
Volume
35B
If the U.S. continues to increase its money supply with expansionary monetary policies, the dollar will lose its purchasing power. Many investors buy gold as a hedge against the devaluation of the dollar, but Bitcoin could also serve the same purpose. Bitcoin is also easier to transfer and store than gold, and it doesn’t require any physical ownership. Bitcoin could also be increasingly used as legal tender in emerging markets struggling with hyperinflation.
As that trend accelerates, more institutional investors could accumulate Bitcoin. The potential passage of the CLARITY Act — which will establish a clear federal framework for regulating digital assets — could also drive those big investors to buy more Bitcoin.
Wood cites all of those common bullish arguments, as well as a belief that younger investors will favor Bitcoin over gold, as her catalysts that will drive Bitcoin toward $1.25 million. If that happens, Ark’s Bitcoin and crypto-driven ETFs could soar a lot higher over the next few years.
But will Bitcoin really reach $1.25 million?
However, investors should take Wood’s bullish price target with a grain of salt. The first issue is that many investors still favor gold over Bitcoin as a safe-haven asset. Over the past five years, Bitcoin’s price has only risen 62%, while gold’s price has surged 145%. Even if investors don’t want to own physical gold, they can still invest in it through spot-price ETFs and tokenized gold.
The second issue is that stablecoins, which are pinned to leading fiat currencies like the U.S. dollar and euro, could reduce the usefulness of Bitcoin and other cryptocurrencies. While stablecoins are still exposed to the devaluation of their underlying fiat currencies, they can still be easily stored and transferred without traditional bank accounts. More consumers and businesses will also prefer to use stablecoins over Bitcoins for regular transactions, since they’re pegged to stable fiat currencies and don’t fluctuate wildly every day.
Lastly, Bitcoin hasn’t established itself as a safe-haven asset yet. Rising interest rates in 2022 and 2023 crushed Bitcoin as investors pivoted toward more conservative investments, and fears of interest rate hikes also caused it to decline nearly 30% over the past 12 months. During the same period, the price of gold rose 26%. Therefore, most investors won’t simply substitute gold with Bitcoin if it’s still considered a speculative investment.
While Bitcoin might have plenty of upside potential, investors shouldn’t blindly assume it will soar past $1 million in just a few years. Instead, they should recognize its strengths and weaknesses and decide if it’s a worthwhile long-term investment.