Bitcoin (BTC 0.62%) has a market capitalization of about $1.9 trillion as of this writing. It represents more than half of the total value of all cryptocurrencies in circulation, which currently stands at $3.2 trillion.
Cathie Wood is the founder of Ark Investment Management, which operates several investment funds focused on innovative technologies like cryptocurrencies, electric vehicles, artificial intelligence, and more.
Ark issued a forecast in 2023 suggesting that Bitcoin could reach a price of $1.48 million by 2030, representing a potential gain of about 1,400%. However, Wood made an even bigger prediction last year, implying that Bitcoin could soar by 3,800% over the longer term.
Bitcoin recently reached a record high of more than $109,000, although it has since retreated a bit. So, how realistic is Wood’s prediction?
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The great Bitcoin debate
May 22 is officially known as Bitcoin Pizza Day, because it’s the date a Florida man paid for two pizzas using 10,000 Bitcoin in 2010. Those 10,000 coins were worth about $41 at the time, but today, they would be worth a whopping $1 billion.
It was the first known real-world transaction using cryptocurrency, and many enthusiasts believed it could be the start of Bitcoin’s journey to replace fiat money one day. Bitcoin still hasn’t caught on as a currency among consumers, and just 7,040 businesses worldwide accept it as payment for goods and services. Instead, most Bitcoin demand actually comes from the investment community today.
Bitcoin has a fixed supply of 21 million coins, which won’t be fully mined, or created, until the year 2140. It also uses a secure system of record called the blockchain, and it’s completely decentralized so it can’t be controlled by any person, company, or government. Those features are the reason investors view Bitcoin as a good store of value, kind of like a digital version of gold.
That idea was somewhat legitimized last year, when the U.S. Securities and Exchange Commission approved dozens of Bitcoin exchange-traded funds (ETFs). These allow financial advisors and institutional investors to buy the cryptocurrency in a safe, regulated manner.
However, it’s important to remember that investors buy Bitcoin in the hope that someone else will pay a higher price in the future, not because it produces anything tangible or worthwhile, so it’s still a highly speculative asset.
As a result, people can legitimately make the argument that it has zero true value. But there’s no denying its incredible returns. It has soared by 42,320% during the past decade, crushing every other asset class, whether it be stocks, real estate, or gold.
Bitcoin Price data by YCharts.
Ark names several catalysts for further upside
Ark points to eight potential reasons for Bitcoin to continue climbing. In my opinion, the following three make the most sense:
- Digital gold: Ark thinks that between 20% and 50% of the money investors normally allocate to gold could go into Bitcoin instead. Since it’s digital and easy to move compared to physical gold, this is a reasonable prediction.
- Institutional investment: This ties into the above point. Institutional investors who view Bitcoin as a store of value might be restricted from investing in cryptocurrencies directly, because they can be risky to hold (digital wallets are sometimes hacked). ETFs solve that problem, so they open Bitcoin up to an entirely new pool of investors.
- Nation state treasury: Most governments store billions of dollars’ worth of physical gold, and Ark thinks they will eventually hold some of their reserves in Bitcoin. President Donald Trump supports this idea for the U.S. government, which could result in a tsunami of new money flowing into the cryptocurrency.
The other five catalysts don’t hold as much water, in my view. For example, Ark predicts that high-net-worth individuals will own Bitcoin because it’s harder to seize than cash and other assets, but we know the U.S. government has successfully confiscated billions of dollars’ worth of the cryptocurrency during the past few years.
Bitcoin is trading at about $98,000 as of this writing, and Ark’s bull case calls for a price of $1.48 million by 2030. That implies a potential return of about 1,400%.
However, during the Bitcoin Investor Day event in March 2024, Cathie Wood said if institutional investors allocate just 5% of their total assets under management to Bitcoin, that alone would warrant a price of $3.8 million eventually. She believes ETFs have laid the foundation for that outcome.
How realistic is Wood’s prediction?
Bitcoin would have a fully diluted market capitalization of $79.8 trillion at a price of $3.8 million per coin. That means Bitcoin would be almost 23 times bigger than the world’s most valuable company, Apple, which is currently worth about $3.5 trillion. It would also be more than twice as much as the annual output of the entire U.S. economy, which is about $29.7 trillion.
Bitcoin ETFs are holding $117 billion worth of assets right now, which is a mere fraction of the cryptocurrency’s current market cap of $1.9 trillion. While that’s an impressive achievement, considering that ETFs have only been around for a year, it could take decades to generate enough inflows (at the current pace) to justify Wood’s forecast.
In my opinion, a more achievable long-term price target for Bitcoin is $919,000. That translates to a fully diluted market cap of $19.3 trillion, which matches the current value of all the world’s mined gold reserves. It would still represent an incredible potential upside of about 840% for investors who buy Bitcoin today.
Of course, since it’s merely a speculative asset, there is absolutely no guarantee Bitcoin will continue to rise in value at all. That’s something investors should keep in mind before taking a position.
