Bitcoin
The main cryptocurrency that could rise 5,700%, according to Cathie Wood. Is it a purchase?
The average investor likes to turn to the professionals when it comes to finding potentially profitable investment ideas. Given his position as an expert in the field of disruptive and innovative business, it makes sense why Katie Wood is closely watched.
Wood and his company, Ark Invest, are incredibly bullish on one of the top cryptocurrencies that they believe could soar to $3.8 million by 2030. This is a truly lofty goal that would catch anyone’s attention.
But does this mean the digital asset is an obvious buy?
Very high expectations
In January of this year, Cathie Wood set a 2030 price target for Bitcoin (Bitcoin -0.10%) of US$1.5 million. Based on this leading digital asset’s price of $44,000 in early 2023, this would imply a whopping 34x gain over the next seven years. This perspective was provided shortly after the long-awaited approval of the Bitcoin Spot Exchange Traded Funds (ETFs).
More recently in March, Wood raised his price target, now saying that if institutions allocated 5% or more of their portfolios to Bitcoin, the price could rise to $3.8 million per coin. At that level, the asset would have a monstrous market capitalization of $75 trillion, making it about three times more valuable than US GDP.
And this implies that Bitcoin could rise almost 58 times over the next seven years from its price on May 16, translating into an annualized gain of 79%. This would, without a doubt, probably outperform all existing assets.
In addition to ETF approvals, Ark Invest points to the recent halving as a key catalyst that could drive the price higher over the next 12 to 18 months, as has happened in previous cycles. More clarity from regulators could also help drive institutional adoption.
Wood highlights how Bitcoin can help diversify one’s portfolio. And it’s hard to dispute Bitcoin’s track record, which has grown 800% in the last five years alone, of significantly increasing one’s purchasing power.
Should you buy Bitcoin?
Cathie Wood and Ark Invest are known for making bizarre projections that make you scratch your head and wonder how likely these outcomes are. I view Bitcoin’s $3.8 million price target the same way. In my opinion, it could just be a marketing ploy to raise more assets for his company’s Bitcoin ETF product. This means that investors should temper their expectations.
But to be clear, just because Bitcoin probably won’t rise 79% a year between now and 2030 doesn’t mean investors should write it off completely. I believe that this cryptography should still be on the radar of all investors, especially those with a long-term horizon. If you are someone close to you or retired, it might be best to stay away.
This is an asset that investors should only buy if they plan to own it for at least the next five to 10 years. It can take a long time for things to happen blockchain technology as well as regulatory developments. And the vast majority of capital out there is nowhere near wanting to own Bitcoin, as stocks, bonds and real estate still reign supreme.
Investors must also be prepared, both financially and psychologically, for the extreme volatility that is sure to occur. Bitcoin has suffered several drawdowns in the past of more than 50%. This just means that you should only invest so much money that results in you not losing sleep at night when considerable price swings occur.
Expecting Bitcoin to reach $3.8 million per coin seems like a pipe dream. Regardless, this cutting-edge crypto can still serve as a very successful investment over time.
Neil Patel and its clients do not have a position in any of the stocks mentioned. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.