It’s no secret Growth investing mastermind Cathie Wood Expect big things from Bitcoin(Crypto: Bitcoin). The Ark Invest fund manager started talking about cryptocurrencies before they became a household name, and she recently doubled her bullish outlook once again.
In an interview with Bloomberg TV last Thursday, Wood reiterated his Bitcoin price target of $1.0 million to $1.5 million by 2030. But that’s not the whole story. The great part of Cathie Wood’s Bitcoin coverage is that she continues to explain her investment thesis in more detail over time.
Last week’s interview was no exception. So let’s take a look at Cathie Wood’s latest nuggets on Bitcoin-friendly economic theory.
First, Wood noted that the likelihood of hitting her current Bitcoin price targets has increased in 2024. Institutional investors are finally taking the digital asset seriously, with the help of new tools like spot Bitcoin exchange-traded funds (ETFs) launched in January. Their investments in Bitcoin should make a huge difference to the asset’s price and stability over the next few years.
“[Large investors]should think about allocation” these days, because there is a cap on Bitcoin’s long-term production.
94.3% of all Bitcoins ever to exist have already been produced and are in cryptocurrency wallets around the world. You cannot get a big slice of the total Bitcoin pie by making or finding more of it as one might do with physical assets like gold or oil. The strict law of supply and demand should push the price of these limited assets higher, so financial institutions must start building their Bitcoin portfolios before they become too expensive.
In this context, $100,000 per coin It is not considered “expensive”. Remember that long-term target price is measured in millions of dollars. Cathie Wood is playing the long game here.
Wood also explained that Bitcoin is more than just a speculative asset. Instead of the next value-free “tulip bulb craze,” Bitcoin serves an important purpose for people who don’t just expect it to gain value over time.
“It is a rules-based global monetary system,” she said. “It’s private, digital, decentralized, and backed by the largest (computer system) in the world. It’s the most secure network in the world.”
Bitcoin is like a global, highly detailed accounting system that keeps track of all the gold in the world, assigns an owner to each piece of the gold block and protects the data through several layers of encryption. You cannot cancel or change any transactions or ownership records without breaking Bitcoin’s transaction recording platform. The asset being tracked in this case is not a physical piece of noble metal, but the computational work that led to the creation of a unique digital token.
There is an unknown but very real limit to the amount of physical gold in the world, until entrepreneurs find additional sources on asteroids or other planets. Meanwhile, there will never be more than 21 million Bitcoin tokens, 19.6 of which are already in circulation. In the long run, this system is almost free of inflation – assuming its security withstands new attack ideas such as Quantum computing algorithms.
Cathie Wood also highlighted how the anti-inflationary approach differs from gold.
“When the price of gold rises, production rises, and the rate of increase in supply increases,” she said. “This cannot happen with Bitcoin. It is mathematically expected to rise by 0.9% per year over the next four years, after which supply growth will halve again.”
In fact, physical gold mining tends to become more popular when the price of the metal is high. Miners want to cash in on these valuable assets when it makes economic sense. The equation is different for Bitcoin miners, who will produce smaller and smaller portions of the digital asset over time. So the cost of minting new bitcoins will increase while the number of new coins being introduced to the market slows down.
So it’s best to put in maximum production effort as soon as possible, because the return on mining machines and your electrical energy investment will diminish over the years. The same logic suggests that buying Bitcoin early will be more profitable in the long run. Waiting for a lower purchase price or an easier mining environment for Bitcoin makes no sense at all.
So Cathie Wood emphasized her 5-year Bitcoin target of at least $1 million per coin, and provided more details about her basic investment thesis.
Other Bitcoin investors may work with different assumptions that lead to different target prices, but the overall market direction is largely consistent. Bitcoin looks ready to rally from the recent $100,000 pricing level. From major banks to ordinary construction companies, most investors should pay serious attention to these new crypto tokens.
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