The closely followed investor’s price target shows just how incredibly bullish she is.
In recent years, Cathie Wood has had the spotlight shining brighter on her. The firm she runs, Ark Invest, offers investors a variety of exchange-traded funds (ETFs) that focus on disruptive and innovative opportunities. In addition to what seems like an exciting investment philosophy, she’s well known for making some incredibly bold predictions about the future.
This is never more obvious than when looking at Wood’s take on the outcome of a top cryptocurrency throughout the rest of the decade. The bullish view is that this leading digital asset will rise 1,974% between now and 2030. A price target like this will certainly turn some heads.
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As bullish as they come
Wood is extremely optimistic about Bitcoin (BTC -1.78%) over the next five years. This is the oldest and most valuable crypto, now with a market cap of $2.3 trillion (as of Aug. 6). But Ark Invest’s thesis centers on more capital flowing into Bitcoin, which should drive the price up.
The asset manager’s bull case sees 6.5% of institutional investment capital owning Bitcoin by the end of the decade. Bitcoin will also cement itself as a digital version of gold, which is probably the best way to describe it today. Bitcoin and gold are viewed as borderless store-of-value assets that have scarce supplies.
Ark Invest and Wood think that people living in emerging markets will prefer holding Bitcoin over their local currencies. This makes sense, because even though Bitcoin can experience a lot of volatility, it’s better than owning a currency in an unstable economy with political risk and inflationary pressures.
The lofty outlook has Bitcoin’s price reaching $2.4 million in the year 2030. Compared to the digital asset’s current price of $115,700, there is nearly 21-fold upside. This translates to an unbelievable 83% gain on an annualized basis. Wood and her team might be the most bullish Bitcoin supporters on the face of the planet, as this price target implies Bitcoin’s growth rate over the next five years will far exceed what it achieved in the last five years.
Think independently
These kinds of predictions can easily draw lots of excitement from the investment community. However, it’s important to always take these price targets with a grain of salt. Ark Invest and Wood could be trying to grow the assets they manage, which would lead to greater fee income. What’s more, no one has any clue what the future will hold, especially with a novel technology.
Investors should think independently, taking the time to learn more about Bitcoin to depend less on other investors’ perspectives. Understand the risks, for starters. Regulatory uncertainty is less of a concern now that the U.S. government has shown its support for Bitcoin. But that doesn’t mean the next administration can’t come in and reverse any progress. Other countries could also be more restrictive.
Bitcoin could also be exposed to technical changes. The risk that quantum computing poses is worth paying attention to, as any breakthroughs in this space could crack Bitcoin’s cryptographic setup, undermining the network’s security.
Nonetheless, there is one obvious reason to be bullish on Bitcoin: its fixed supply of 21 million. The world is drowning in ever-expanding debt. And the money supply continues to grow. Allocating a small portion of your capital to something that has a finite limit looks like a prudent decision.
I’m very confident that Bitcoin won’t rise 1,974% to reach $2.4 million per unit in five years. This asset is maturing as time passes, so it’s reasonable to believe the price will increase at a slower clip between now and 2030 than the gain registered in the past five years. This more realistic outlook doesn’t mean Bitcoin doesn’t still make for a wonderful investment opportunity.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.