1 Top Cryptocurrency to Buy Before It Rises 6,200% According to Cathie Wood of Ark Invest

It’s no secret that Bitcoin (BTC 0.33%) is capable of some truly amazing returns. Unfortunately, unless you were aware of the relatively obscure phenomenon in its early days, you may have missed the boat with, say, 30,000% gains in a year like the one you saw from the summer of 2010 until his summer. 2011. But that doesn’t mean Bitcoin is done delivering serious growth.

Cathie Wood, the maverick head of Ark Invest and outspoken Bitcoin follower, certainly believes the cryptocurrency has a long way to go. Wood doesn’t shy away from making bold predictions when it comes to Bitcoin’s future. They most recently set a target of $3.8 million by 2030. That’s a return of over 6,200% from the current price and a compound annual growth rate (CAGR) of about 130%.

$3.8 million is the best case scenario for Cathie Wood, not the most likely

To be clear, Wood and her firm have set multiple targets, and $3.8 million is the best and optimistic scenario. At the other end of the spectrum, Wood has set a bear case target of just under $260,000, while her base case — albeit one she describes as conservative — is nearly $700,000 dollars. These would still both be high returns that far exceed what can generally be expected from other asset classes.

In the last decade, S&P 500 — a useful indicator of the broader stock market — has averaged a return of 12 percent, while gold returned just 5 percent. Of course, past performance is never a predictor of future performance, but it’s helpful to have some historical context.

Here’s what would have to happen to hit Cathie Wood’s Bitcoin price target

Wood sees several possible sources of growth for Bitcoin. Its biggest factor is the view that Bitcoin is a digital form of gold. It becomes a store of value that can be used to hedge against inflation and currency devaluation. She sees a change in feeling. Bitcoin is moving from a speculative investment to a wealth protection vehicle, pointing to the 2023 banking crisis, which saw an increase in the volume of money moved into Bitcoin. In times of crisis and uncertainty, people tend to move money from what they perceive to be risky assets to safer ones.

Another important factor is institutional adoption. This has been a major shift in the market over the past five years, just the way the big financial firms like it BlackRock and Goldman Sachs have started adding Bitcoin to their balance sheets. This trend is growing. Nearly 40 percent of international investors had at least some exposure last year, up from 31 percent in 2022, and the recent approval of spot Bitcoin ETFs like Wood’s. ARK 21 Shares Bitcoin ETFfurther accelerates the trend.

In her case, these are the only major factors. However, in the base case, additional factors such as adoption as an emerging market currency, use by global high-net-worth investors concerned about asset seizure, use as a bank settlement network, and several other factors all help figure stimulation.

Her $3.8 target would require all of that, with particularly aggressive buy-in from institutional investors. She believes that if firms, on average, allocate 5% of their portfolios to Bitcoin, it would be enough to push the price up to $3.8 million.

So is Cathie Wood’s Bitcoin target reasonable?

I will say that while it is certainly possible, the bull case is a pretty aggressive target and not very likely in my view. While 5% of global institutional capital that is invested in Bitcoin may not seem like much, keep in mind that the vast majority of this capital is invested in stocks and fixed income assets such as bonds. “Alternatives,” an umbrella term that includes everything from private equity to real estate, makes up just 7%.

Meanwhile, although it’s difficult to put an exact number on it, 55% of the largest institutional investors have less than 1% of their assets in Bitcoin today. That is where most of the capital of the financial market is concentrated. Sixteen percent have no Bitcoin to speak of. It would represent quite a seismic shift in institutional behavior to reach 5% by 2030 from this extremely low level of crypto interest.

That said, I think institutional buy-in will continue to increase, reaching a level that is more in line with Wood’s bear or even base cases, 1% and 2.5% respectively. Most firms say they are looking to expand their investments in Bitcoin in the coming years, and as this trend continues, more risk-averse players will start to dive in. Regardless of the specific target that Bitcoin hits, I agree with Wood that Bitcoin will likely outperform the broader market in the coming years.