The price of Bitcoin has been on a tear, rising nearly 160% this year and about 25% month to date. That might be just the beginning, ARK Investment Management CEO Catherine Wood told Barron’s readers Thursday.
Bitcoin’s recent rise to $18,640 may give investors flashbacks to 2017, when the cryptocurrency reached a high of $19,783.21 in December before selling off. This time is different for one big reason, Wood said: the involvement of institutional investors, which she said could drive Bitcoin’s price to $500,000.
The founder of ARK and a noted booster of disruptive technologies such as Bitcoin and Tesla told attendees of Barron’s virtual Investing in Tech series that Bitcoin is the most recognized currency of the crypto-asset ecosystem. “It’s the equivalent to the dollar in the fiat currency system,” she said. “That’s a pretty exalted role.”
Wood added that the rise of central-bank digital currencies, or CBDCs, has added legitimacy to Bitcoin, referencing China’s ambitions to launch a digital yuan.
Some investors, she said, see Bitcoin as a digital alternative to gold or an insurance policy against inflation. With the Federal Reserve’s decision to keep interest rates low for the foreseeable future, that’s one reason Bitcoin’s price could be rising. And if institutional investors like hedge funds were to take a greater interest in Bitcoin, it could send prices even higher, Wood said. What’s more, Wood noted the supply of Bitcoin units tops out at 21 million. There are about 18.5 million currently in existence, she said.
Wood said institutions have been bumping up their exposure to the cryptocurrency recently, drawing a comparison to “the early days of institutions moving into real estate and emerging markets,” when allocations started small, then grew. “They started out with a half a percent allocation, then [1%], and then 5% or thereabout seemed to be the right number.”
If all institutions were to assign a similar mid-single-digit allocation to Bitcoin, the cryptocurrency could rise “to somewhere in the $400,000 to $500,000 range,” Wood said.
Tesla (ticker: TSLA) also has room to grow, despite its momentous 491% year-to-date rise, Wood said—although she added, “as the saying goes, the easy money has been made.”
Wood said institutions focused on benchmarks “will probably move into the stock” following the company’s inclusion in the S&P 500, announced this week. “If we’re right, [Tesla] has miles to go—miles and miles to go.”
Investors should look at Tesla as a true technology stock, not as an auto-manufacturing stock, she told attendees, adding that the stock’s lofty valuation shouldn’t be a concern. “Most people don’t understand what this animal really is,” she said. “It is a technology stock, and it is running away with the electric-vehicle market in a way that I think has been surprising to most.”
The future for Tesla is in the autonomous vehicle space, Wood said. “We believe it’s in the pole position to become—in the United States, at least—the dominant autonomous taxi network within the next few years.”
Wood also touched on recent news that Resolute Investment Managers, ARK funds’ U.S. distributor, moved to take over the business next year. She referred to ARK’s prior statement on this development, in which she said she was “disappointed” by the news. Wood said many know that “we do not want this to happen,” adding “we’re in negotiations, and so I’ll just leave it there.”
Email: Shaina Mishkin at [email protected]
