Cathie Wood is the chief executive and chief investment officer at Ark Invest, an asset management company focused on disruptive technologies like blockchain and cryptocurrency.
Wood and her team see substantial upside across the cryptocurrency market, driven by innovations in smart contracts and decentralized finance. But Ark is particularly optimistic about Bitcoin (CRYPTO: BTC). Its bull-case valuation model prices Bitcoin at $1.48 million by 2030, implying more than 2,000% upside from its current price of almost $71,000.
Ark clearly sees Bitcoin as an asset worth buying. But investors should understand the investment thesis and the potential risks before making any decisions.
The investment thesis for Bitcoin
The investment thesis for Bitcoin is simple. Like any asset, its price is a product of supply and demand. Bitcoin is somewhat atypical because its supply is capped at 21 million coins due to the periodic reduction of mining rewards known as halvings. To elaborate, miners are awarded Bitcoin when they add blocks of valid transactions to the blockchain, but the reward is cut in half after every 210,000 blocks.
As a caveat, the supply limit is theoretically subject to change, but the odds of that are slim to nonexistent. It would require a consensus among those who operate the nodes, the computers that run the Bitcoin software. But those network participants would have no reason to approve such a change because increasing the supply would devalue the cryptocurrency.
For that reason, we can assume demand will remain the most consequential variable where Bitcoin is concerned. That means more demand will move its price higher, and less demand will move its price lower. Right now, demand seems to be trending upward. The number of wallet addresses holding at least $1,000 in Bitcoin reached a new all-time high in late December 2023, according to Fidelity.
However, demand would need to increase substantially for a single Bitcoin to reach $1.48 million by 2030. To that point, Wood’s Ark Invest outlined several sources of potential demand that support its valuation model.
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Ark Invest’s valuation model for…
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