Bitcoin price to US$500,000? Why ARK’s Cathie Woods is doubling down

Cryptos could get a boost if more institutional investors embrace them.

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The Bitcoin (CRYPTO: BTC) price is up 7% over the past week and flat over the past 24 hours. One Bitcoin is currently worth US$57,564 (AU$77,789).

That, according to data from CoinMarketCap, gives the world’s first and biggest crypto a market cap just north of US$1.08 trillion dollars. It also means Bitcoin represents some 45% of the total global crypto market in terms of value.

With the digital token again closing in on its all-time highs of more than US$64,863, some crypto bulls are eagerly eyeing the US$100,000 level.

Others, like Cathie Wood, the founder of asset manager ARK Invest, believe it will run far higher.

All the way to US$500,000.

Bitcoin price to US$500,000?

It’s not the first time Woods has made this prediction for the Bitcoin price. She’s a long-term avowed Bitcoin bull.

ARK not only owns Bitcoin in its portfolio, the asset manager is hoping to launch a futures-based Bitcoin exchange traded fund (ETF) in the United States. To date the US Securities and Exchange Commission (SEC) has yet to greenlight any crypto related ETFs. But the SEC is considering the matter.

So how does Woods see the Bitcoin price soaring another 770% from here?

Speaking at the CFA Societies of Australasia conference yesterday, Woods said (quoted by the Australian Financial Review):

I have seen two periods in my investment life where what seemed like new asset classes were moving into institutional portfolios. Real estate in the 70s and 80s and emerging markets…

If institutions around the world were to allocate 5 per cent of their portfolios to bitcoin, that allocation alone, and this is just one of many use cases out there, would add roughly $500,000 to bitcoin’s price.

To be clear she’s talking about US dollar prices here. Meaning a forecast Bitcoin price of AU$675,000.

Woods doubled down on her prediction saying, as the AFR summarises, that it doesn’t even take into account “the potential for large corporations like Square, MicroStrategy, and Tesla to allocate more of their balance sheet holdings to bitcoin instead of cash”.

Proceed with caution

If Woods is right about the direction of the Bitcoin price, ARK and other Bitcoin investors stand to make some heady gains.

But don’t forget that just one year ago today, on 15 October 2020, Bitcoin was trading for US$11,500.

Go back a little further, to 12 March 2020, and the Bitcoin price was as low as US$4,900. That came during the global market selloff following the initial pandemic panic, indicating the token was far from immune from forces impacting the wider asset markets.

Never invest more than you can afford to lose.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin, Microsoft, Square, and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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