Ark Invest's Cathie Wood continues to raise her stock forecast little by little. Bitcoin (BTC 0.77%). At the recent Bitcoin Investor Day event in New York City, Wood raised his 2030 Bitcoin price prediction to $3.8 million from an already high number of $1.5 million. Considering his current price is around $70,000, that's an impressive return of about 5,300% in just six years.
At first glance, this prediction sounds outlandish. However, there are two key catalysts that could ultimately make it a reality.
In-facility adoption
The main factor driving Bitcoin to previously unthinkable heights is more powerful than anticipated institutional adoption. Simply put, large institutional investors are waking up to the idea that Bitcoin is an independent asset class worth incorporating into their portfolios. With the launch of the new Spot Bitcoin Exchange Traded Fund (ETF), you can now invest in Bitcoin in a regulated way without directly participating in the crypto market.
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Investor inflows into new spot Bitcoin ETFs since January have been incredible. The top two Spot Bitcoin ETFs have collectively amassed more than $25 billion in client assets in just over two months.and new Ark 21 Shares Bitcoin ETF (ARKB 3.32%) The company's performance isn't too bad either, with nearly $3 billion in assets under management. Sure, some of this money comes from small retail investors, but the majority comes from institutional investors.
The big question, of course, is what portion of their assets these institutional investors will choose to allocate to Bitcoin over the long term. Currently, a prudent allocation range appears to be between 1% and 3%. But Wood believes this allocation will eventually rise to well above 5%. She argues that this percentage would be high enough to push Bitcoin past the $1.5 million level.
Bitcoin as a financial superhighway?
But something more is needed for Bitcoin to reach its full potential. The way I see it, if people just hoard their Bitcoins and hold onto them for life, it's highly unlikely that Bitcoin will reach $3.8 million. In fact, people need to do something with their Bitcoin. In cryptographic terms, Bitcoin requires some kind of utility.
That's why Ark Invest has consistently focused on all potential use cases for Bitcoin. From a macro perspective, the growth of these use cases should increase demand for Bitcoin and drive its price higher. In Ark Invest's “Big Ideas 2023” report, the investment firm outlined eight major use cases for Bitcoin, predicted its growth potential, and tallied the market size of each in 2030. This is how Ark Invest arrived at his $1.5 million price target. In the case of Bitcoin.
Wood said rapid price increases could only occur if Bitcoin becomes a “financial superhighway” for the world's banking and financial systems. Building such a financial superhighway will be particularly important for emerging market countries, Wood says. So you can imagine a Bitcoin superhighway traversing Latin America or connecting countries in sub-Saharan Africa.
This sounds impressive, but how realistic is this scenario? After all, Bitcoin is still a relatively slow, proof-of-work blockchain, designed to handle smart contracts. Is not … It is not as fast as other blockchains, it is not as energy efficient as other blockchains, and it is not as flexible or scalable as other blockchains. And that's why all the use cases originally planned for Bitcoin, such as the scenario where one day we all pay for everything we buy with Bitcoin, haven't materialized.
From my perspective, it would be much better to build a financial superhighway using a super-fast, super-cheap blockchain like: Solana (Sol 0.36%).flat cardano (ADA -0.88%) It may actually be a better choice, especially considering its expansion into sub-Saharan Africa. So I'm not as ready to accept this financial superhighway view of Bitcoin as I am to accept former Vice President Al Gore's “information superhighway” view of the Internet.
How realistic is the $3.8 million price tag?
Whether Bitcoin can achieve its $3.8 million target price will depend on whether Bitcoin can continue to provide investors with historically high returns. Working backwards and doing just a little behind-the-scenes math, for Bitcoin to reach his $3.8 million price by 2030, he would need to achieve an annualized return of just over 100%. .
Indeed, Bitcoin has done the same thing before. Over the 10-year period from 2001 to 2011, Bitcoin achieved an annualized return of 230%, making it the world's best-performing asset. And just last year, Bitcoin posted a whopping 150% performance. Therefore, this is not to say that Bitcoin cannot yield 100% returns per year.
But at some point we have to temper our expectations and break some of the current Bitcoin ETF hype. While I remain very bullish on the outlook for Bitcoin, I am also concerned that some of these price predictions are rising too quickly.
