Cathie Wood of Ark Invest keeps raising her Bitcoin price predictions. Wood raised her 2030 Bitcoin price projection to $3.8 million from $1.5 million at Bitcoin Investor Day in New York City. Given today's pricing around $70,000, there would be a 5,300% gain in six years.
Organizational adoption The main reason Bitcoin is rising is stronger-than-expected institutional acceptance. Simply put, huge institutional investors are realizing Bitcoin is a standalone asset class worth including in their portfolios. The advent of spot Bitcoin exchange-traded funds (ETFs) allows them to invest in Bitcoin without actively participating in the crypto market.
Investors enter the new spot. Bitcoin ETFs since January have been amazing. The top two Bitcoin ETFs have over $25 billion in customer assets in two months. The new Ark 21Shares Bitcoin ETF (NYSEMKT: ARKB) has approximately $3 billion in assets under management and is doing well. Some of this money comes from regular investors, but institutional investors dominate.
What percentage of their assets institutional investors devote to Bitcoin over time is the key question. 1% to 3% is the current prudent allocation range. Wood expects this allocation to exceed 5%. She believes that proportion would drive Bitcoin beyond $1.5 million.
Bitcoin as financial superhighway? Bitcoin needs more to reach its full potential. If people hoard Bitcoin and cling on for dear life, it's unlikely to reach $3.8 million. Actually, Bitcoin users should act. Bitcoin must have utility in crypto terms.
Ark Invest always considers all Bitcoin application cases. These use cases will increase Bitcoin demand, which should boost its price. In Ark Invest's "Big Ideas 2023" study, the investment firm identified eight Bitcoin use cases, projected their growth, and calculated their 2030 market sizes. Ark Invest calculated Bitcoin's $1.5 million price target that way.
Wood argues Bitcoin can only appreciate rapidly if it becomes a "financial superhighway" for global banking and finance. For rising market nations, Wood adds, a financial superhighway is crucial. Imagine a Bitcoin freeway connecting Latin America or sub-Saharan Africa.
This sounds inspiring, but is it realistic? Bitcoin is a sluggish, proof-of-work blockchain that wasn't meant for smart contracts. It's slower, less energy-efficient, and less adaptable and scalable than other blockchains. Because of that, none of Bitcoin's original use cases, such as paying for everything with Bitcoin, have come true.
I prefer building a financial expressway with a fast, affordable blockchain like Solana (CRYPTO: SOL). Cardano (CRYPTO: ADA) may be superior, considering its progress in sub-Saharan Africa. This financial superhighway concept of Bitcoin isn't as appealing to me as former Vice President Al Gore's "information superhighway" perspective of the internet.
How realistic is $3.8 million? Bitcoin's capacity to reach $3.8 million rests on its ability to produce historically high investor returns. Working backward and using some back-of-the-envelope calculations, Bitcoin would need annualized gains of little over 100% to reach $3.8 million by 2030.
Bitcoin has done this before. Bitcoin has 230% annualized returns from 2001 to 2011, making it the world's best-performing asset. Bitcoin surged 150% last year. Bitcoin may return 100% year.
You must temper your expectations and cut through the Bitcoin ETF hype at some point. Though I'm still enthusiastic about Bitcoin, I'm worried that some price estimates are reaching too high too rapidly.
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