The rise of Bitcoin (BTC 1.98% ) over the past decade has led top financial luminaries to lay out their position on this burgeoning asset. Cathie Wood, CEO of Ark Invest, is one of the most vocal proponents. His investment company catapulted itself into the spotlight in 2020 thanks to the success of the Ark Innovation ETF (ARKK -1.34% ) .
In one of the more bullish estimates around, the company called for Bitcoin to hit $500,000 by 2026 last September. Even better, it recently doubled in January when‘she predicted that a Bitcoin would be worth $1,000,000 or more by 2030.
—Bitcoin Magazine (@BitcoinMagazine) January 25, 2022
What is Ark based on for such an estimate?
So that Bitcoin reaches a price of $1,000,000, it would take that it increases by nearly 2,000% in just under eight years. That doesn’t look too crazy considering that it’s up around 3,500% since 2017. If Bitcoin is to reach these levels, a lot has to change, and current trends have to amplify.
Cathy Wood and his firm arrived at these estimates after authoring several research papers that took one of the most comprehensive and thorough assessments of the current and future state of Bitcoin. This research highlights a multitude of macro and microeconomic factors that led Cathie and her team to the million dollar hypothesis.
During a recent interview in Miami at the Bitcoin Conference, Wood was first asked about her reasoning. A few of his key points stood out.
1- Political support for Bitcoin
Most important was Bitcoin’s new political support. In particular, she referred to Janet Yellen (Treasury Secretary) and Gary Gensler (Chairman of the SEC). Wood credited Gensler with driving the 180 degree turn of Yellen’s previous anti-crypto sentiment. She thinks Gensler will have more success persuading other politicians because of his experience as a professor of cryptocurrency at MIT.
She speculated that Bitcoin would become a hot topic for voters in the upcoming election. Wood said it wouldn’t surprise her if political candidates ran entire campaigns in support of Bitcoin and crypto in general. In typical candor, Wood laughed considering how much the political divide has widened recently, of all things, Bitcoin now enjoys bipartisan support.
2- Widespread adoption
Another topic was increased accessibility of Bitcoin in the United States. Wood directly referenced the innovation and integral role of Bitcoin’s Layer 2 scaling solution, the Lightning Network, in bringing more users to Bitcoin nationwide. Payment apps like CashApp have used the Lightning Network to onboard millions of users to the Bitcoin network.
Overall, Wood believes there are “an incredible number of use cases and Bitcoin is leading the charge.”
The opportunities abound for Bitcoin to be used as a hedge against government currency manipulation in developing markets. She believes that more wealthy people will use Bitcoin as an insurance policy against having their wealth confiscated by governments. And finally, just like her company, she said that institutional investors will continue to buy Bitcoin slowly but surely.
3- Trust the professionals
Arch Invest exercised due diligence and, just as Baby RuthCathie Wood calculated her move. Their business model depends on them being right about this stuff.
Let’s say Cathie Wood is only half right, or quarter right. If Bitcoin were to reach these prices, it would still be one of the most valued assets of our generation. Short-term price fluctuations for Bitcoin don’t matter in the grand scheme of things. The year 2030 will be here before we know it and it fits perfectly into the age-old buy and hold investment strategy.
This article represents the opinion of the author. Questioning an investment thesis — even one of our own — is a good thing. Do your own research, and don’t take any predictions, expert or otherwise, for free!