Cathie Wood has long been very bullish about the price of Bitcoin, but this time she has hypothesized a scenario that may seem excessively optimistic even to the most bullish investors.
His new hypothesis is that the price of Bitcoin could even reach $3.8 million, if institutional investors start investing heavily in it.
❖ CATHIE WOOD RAISES HER BITCOIN PREDICTION BY $2.3 MILLION
According to Wood, Bitcoin could go as high as $3.8 million if institutional investors were to begin investing heavily in it. While the analysis is likely correct, it is unlikely that institutions would put 5% of their… pic.twitter.com/Kc6bBBHNMP
— *Walter Bloomberg (@DeItaone) May 1, 2024
Cathie Wood’s hypothesis on the price of Bitcoin
Intervening at an investor day in New York, Wood recalled that last year they had already presented another bullish hypothesis, according to which BTC could have risen to 1.5 million dollars.
However, the SEC’s approval of Bitcoin spot ETFs, which only came in January of this year, allows for extending this hypothesis.
Wood’s reasoning starts from the consideration that now, thanks to those ETFs, even institutional investors could allocate a portion of their portfolio to Bitcoin, albeit indirectly.
It should not be forgotten that the more actions of Bitcoin spot ETFs are purchased, the more the managers of those ETFs must buy real BTC on the crypto markets to provide the funds with sufficient collateral to cover all issued shares.
Wood hypothesizes that, in the event that institutional investors allocate about 5% of their portfolios to take a position in Bitcoin, these movements would add another $2.3 million to the previous price projection. So in total, the price would increase from $1.5 to $3.8 million.
This analysis seems to be correct from a theoretical point of view, but many believe it is unlikely that institutional investors will go as far as allocating 5% of their portfolios to Bitcoin. Especially because at this moment the average allocation of this type of investors is still close to zero.
The impact of institutional investors
The fact is that, now that there are Bitcoin spot ETFs on US stock exchanges, institutional investors could really start pouring into BTC.
However, the doubt lies in the percentage of their portfolio that they could dedicate to this high-risk investment.
Today, the new Bitcoin ETFs, excluding the one from Grayscale that already existed in another form, have accumulated more than 500,000 BTC in just under four months, attracting over twenty billion dollars.
Such a figure may seem high, but in reality it is not at all. Just think that BlackRock alone manages a total of about 10,000 billion dollars in assets, and that the total market capitalization of Bitcoin is over 1,100 billion.
This is due to the fact that the average portfolio share held by institutional investors in BTC is almost close to zero, and this explains why if this average were to jump to 5% the price of Bitcoin could rise so high.
Bitcoin Price: Other Hypotheses Beyond Cathie Wood
Although there is no certainty about whether the average share held by institutional investors in BTC will rise significantly from where it is now, many expect this to happen.
Until recently, it was hypothesized that it could be around 0.5%, or ten times less than what Cathie Wood predicted. In this case, the price of Bitcoin could reach even over $300,000, or even close to $400,000.
Instead, if the average exposure reached 1%, then one could even hypothesize a Bitcoin price close to one million dollars, and with a 2% average allocation, Wood’s first prediction could come true, with BTC at 1.5 million dollars.
Wood has always been very bullish on Bitcoin in recent years, so her prediction in this regard may not be very reliable.
However, a lot will depend on the timing, because it changes a lot if we consider the next 5 or 10 years, or if we consider much longer timeframes like 20 or 30 years.
The conflict of interest
All this is added to the fact that one of the new Bitcoin ETFs launched in January is ARKB by Ark Invest, the company of Cathie Wood.
Up to now it has reached an AUM of over 2.4 billion dollars, and has acquired more than 41,000 BTC. Among the new ETFs, excluding GBTC from Grayscale, it is the third with the most Bitcoin, behind the 273,000 BTC of IBIT (BlackRock) and the 149,000 BTC of FBTC (Fidelity).
So although ARKB started off strong, it is not currently among the largest spot Bitcoin ETFs in the world.
It should be noted that these are single-asset ETFs with passive replication, and not actively managed ETFs like those commonly managed by Ark Invest.
Furthermore, Wood is known for being very optimistic about the future evolution of financial markets, but for example on Coinbase she was right, as she started buying shares of the largest US crypto exchange just a few months after its market launch.
If his prediction of BTC at 3.8 million dollars seems indeed very optimistic, especially considering a timeframe of less than 10 years, following his reasoning it would seem plausible at least the surpassing of $300,000, provided that institutional investors actually decide to buy en masse shares of Bitcoin spot ETFs.