CEO & Founder, ARK Invest
Cathie Wood Bitcoin Hits $2 4 Million If These 3 Things Happen
ARK Invest CEO Cathie Wood and Research Director Frank Downing sat down for a rare interview and dropped major signals on ...
About Cathie Wood
Cathie Wood, CEO and CIO of Ark Invest, has recently discussed several investment themes, including Bitcoin, autonomous vehicles, and the broader economy. Regarding Bitcoin, Wood stated that her conviction in the asset has not diminished and that she would consider increasing exposure, describing the current period as a "bottoming process." She argued that stablecoins are likely to increase the U.S. dollar's influence by exporting dollars to emerging markets, and she contrasted Bitcoin's non-government, seizure-resistant nature with stablecoins, which she described as an extension of government money. Wood also expressed a contrarian view that the dollar will move up as returns on invested capital in the U.S. rise due to deregulation and tax cuts. On the topic of autonomous vehicles, Wood said she believes Tesla will be a "winner take most" market participant in robotaxis, citing its years of training data. She predicted that auto production has already peaked, partly due to ride-hailing services, and that the cost of transportation could fall significantly. In macroeconomic commentary, Wood characterized the economy as moving into "boom territory" but noted that markets were plummeting, attributing this to uncertainty around new Federal Reserve Chairman Kevin Warsh. She argued that the Fed's past attempt to solve a supply shock with higher interest rates was a mistake, and she predicted that productivity gains would lead to lower-than-expected inflation. Wood also highlighted a boom in capital spending and suggested that labor shortages, rather than a glut, would be a surprise in the coming years.
Transcript (25 segments)
✨ AI-enhanced transcript with speaker attribution
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Cathie Wood0:00
So, it's scarcity value is why it will become more valuable over time. So, I would diversify, average down. Actually, we've been talking about semiconductors quite a bit recently. There's a correction now. I can see some averaging down there. It looks like Bitcoin is bottoming out, testing a base. Our conviction in it has not been diminished. So, I would definitely take increased... I shouldn't say this. I can't say this.
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Unknown0:34
[laughter]
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Cathie Wood0:35
I would definitely consider increasing exposure to Bitcoin as many are worried about the 4-year cycle. Yes, well, as always, our suggestion is to have a diversified portfolio and buy low, sell high. So, Bitcoin is low right now. I'm not saying it's at its bottom, one never knows, but it does seem to be basing, and we are moving into more regulatory clarity with the Clarity bill. And if we're right, AI is going to keep booming moving forward, but also creating this age of abundance, meaning supply of everything is going to go up very rapidly, which cannot happen with Bitcoin. Its scarcity value will shine through, we think, during the next few years.
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Narrator0:49
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Cathie Wood, ARK Invest CEO, just said something live on camera and then stopped herself. "I would definitely take increased... I shouldn't say this. I can't say this." That's not a slip. That's a CEO catching herself in real time mid bull call on Bitcoin. And right after, her own research director backs it up on camera, no hesitation. Bitcoin is low right now. So, what's ARK actually telling investors behind closed doors that Cathie almost said out loud? Let's get into it.
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Frank Downing1:37
So, we build our valuation model for Bitcoin by adding together different use cases. The first and the biggest is digital gold. And you've seen gold go up in value a lot recently. But it's also a nation-state asset, a corporate treasury. We actually have had payments as a use case for Bitcoin for some time, and we see stable coins taking some of that role. All of these use cases, and I should mention also an institutional investment as part of a diversified portfolio, are the main contributors to our model, and result in the 710,000 base case. The 1.2 million, we take all of these market sizes, and we divide them by the number of Bitcoins, 21 million for the first number. And if you account for tokens that are lost or locked up like the Satoshi tokens, that's how you get to the 1.2 million number. But I think generally when we think of the market, it's really the 710,000 that I think is the right base case, and 1.2 million as a base case was reported on that thought experiment as our main base case. So, I would think of 710,000, but keep in mind these market sizes are changing, and the price of gold going up impacts our model, as does the value of the equity markets generally, which influence the size of institutional portfolios.
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Interviewer3:08
So, we understand that there are lots of variables that affect your model. For now, it's 710,000 price that you're looking at. So, we just want to ask you, among ETF adoption, corporate treasury adoption, nation-state adoption, and stablecoin expansion, all of things, which variable do you currently view as the most important one?
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Frank Downing3:27
The largest contributor is the use case of Bitcoin as digital gold. It is really unique in being, one, scarce, and two, an alternative to government money, and that's really unique to Bitcoin. That's the largest contributor to the model. But in terms of the overall market narrative around it, the institutional adoption is really a key component, where we see institutions like BlackRock beginning to position Bitcoin as an asset that should be in a diversified portfolio.
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Cathie Wood3:57
Yes, and I think that in terms of contribution to the price, we're probably going to see the institutional demand increase relative to gold, I would say. One of the reasons is this is a new asset class and its correlations, whether you're talking about risk or return, its correlations to other assets are very low. And in fact, even relative to gold, the correlation with gold is only 0.1. We took that from 2019 to today. So, that's a very low correlation. That's what institutions want. Asset allocators want a diversified portfolio to increase their risk-adjusted returns, and that is what Bitcoin will do.
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Interviewer4:51
So, over the past year, digital asset treasury companies have rapidly increased in number. Companies like Strategy have bought a lot of Bitcoins and a lot of people made money from that, but do you see this as evidence that Bitcoin is becoming part of the corporate treasury strategy as a new form of leverage machine?
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Frank Downing5:10
In some ways it's both. Strategy in particular has quite a bit of leverage, which they call amplification. It's about 40% leverage relative to their assets. That's what has allowed them to outperform in up markets, but that leverage causes them to underperform in down markets. So, I think it's something that investors in digital asset treasury companies should be aware of. And the second part is that very few treasury companies have been able to scale effectively. It's really only Michael Saylor's Strategy and Tom Lee's Bitmain. Those are the two largest and it seems like winner take most in the corporate treasuries.
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Cathie Wood5:55
I actually have a contrarian view. We think the dollar's going to move up as the returns on invested capital in the United States move up based on deregulation, like we're seeing with crypto, and lower taxes, better tax treatment. Somewhat contrarian, but we are maintaining that stance.
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Interviewer6:27
If stable coins become better money across the emerging markets, what role will Bitcoin play within the future digital financial ecosystem?
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Frank Downing6:37
So, we see people really wanting to see stable coins as competitive to Bitcoin, but I think it's important to remember that the purpose of Bitcoin and a key value proposition is that it is non-government and seizure-resistant money. So, this is actually very different from stable coins, which are an extension of government money. We actually saw this really acutely in April when the US government actually used stable coins to seize funds from Iranian-linked entities. That is not possible with Bitcoin. Bitcoin is truly independent and you cannot seize it remotely. So, I think that value proposition still really holds and is even more unique now, even as we see stable coins being adopted for day-to-day payments, which we think is one of the areas where they excel.
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Cathie Wood7:30
Yeah, and one thing I will say in addition to that is, even in the Bitcoin community, the OG Bitcoiners are looking at stable coins almost as a humanitarian kind of bridge into the future of Bitcoin. Because Bitcoin right now is very volatile. It's been in a bit of a bear market and people in emerging markets who are living hand-to-mouth cannot afford the volatility. That's why they are demanding stable coins. Longer term, as wealth increases around the world thanks to all of the technologies that are evolving, we believe more and more people will move into Bitcoin because of its scarcity value as Frank discussed earlier.
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Narrator8:23
So let's recap what Cathie Wood and Frank Downing just laid out. ARK's base case for Bitcoin by 2030: $710,000. Their bull case: 2.4 million. Strategy's leverage play, Frank just put a number on it: 40% amplification. Great on the way up, brutal on the way down. And the line that matters most: Bitcoin isn't competing with stable coins. Bitcoin is the only asset the government cannot seize.
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Cathie Wood8:50
So, its scarcity value is why it will become more valuable over time. So I would diversify, average down. Actually, we've been talking about semiconductors quite a bit recently. There's a correction now. I can see some averaging down there. It looks like Bitcoin is bottoming out, testing a base. Our conviction in it has not been diminished. So I would definitely take increased... I shouldn't say this. I can't say this.
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Unknown9:25
[laughter]
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Cathie Wood9:25
I would definitely consider increasing exposure to Bitcoin as many are worried about the four-year cycle. Yes, well, as always, our suggestion is to have a diversified portfolio and buy low, sell high. So, Bitcoin is low right now. I'm not saying it's at its bottom, one never knows, but it does seem to be basing, and we are moving into more regulatory clarity with the Clarity bill. And if we're right, AI is going to keep booming moving forward, but also creating this age of abundance, meaning supply of everything is going to go up very rapidly, which cannot happen with Bitcoin. Its scarcity value will shine through, we think, during the next few years.
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Frank Downing10:26
I agree with everything Cathie said, especially the concept of taking profits along the way, averaging out, and then averaging back in on the way down as a way to not try to perfectly time the bottoms or the tops of the market. I learned that from Cathie. And another piece of advice that I like, or one of the reasons why I like investing, is that it feels like learning. And I feel like if you're going to be investing in the market, it's an opportunity to always be learning and teaching yourselves new things using AI to teach yourselves new things. And if you're really engaged, it can help you understand the market better and the technologies, and it's always better to invest in something you understand than to invest in something you just heard on the street. So, that's other advice that I like to give.
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Interviewer11:27
The US is rapidly advancing regulatory frameworks for stable coins and digital assets in general. And what does this evolving regulatory environment mean for ARK's crypto investment strategy?
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Cathie Wood11:39
Well, I can reflect on one of our last answers. One of the reasons institutions have not been moving in aggressively is we don't have the Clarity Act passed. Some are waiting for that. So, that's another answer to the question: did we pull demand forward? No, not at all. Some institutions haven't even started getting involved. In terms of the regulatory framework, it's a very healthy development and we do believe as more institutions evolve their crypto strategies that they will become more active in their approaches. Today, we have a fund, a spot Bitcoin ETF, and we did that fund as almost a public good. We believe everyone should have access to a low-price fund for Bitcoin. So, we have that one passive strategy, but ARK is an active manager. And so, we are going to use our research to evolve portfolios going forward that we think are going to be able to capitalize on the various moves among the different assets as this world becomes more institutionalized.
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Interviewer13:19
Private stable coins are continuing to expand globally. Does that weaken traditional US dollar dominance, or does it eventually strengthen the dollar's influence on chain?
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Cathie Wood13:30
Well, this is an interesting question because many people believe that Bitcoin in particular was going to be a big challenge to the dollar. We have seen some dollar weakness, but we actually think that stablecoins are going to increase the dollar's influence because they are backed primarily by US Treasury securities, and of course dollars. So, we see this as a way to export dollars to people, especially in emerging markets, whose currencies are extremely volatile and whose monetary and policy regimes are not in sync with maintaining the purchasing power and wealth of their own populations. So, we think the dollar's going to have increased influence, and we...
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Narrator14:20
Stablecoins already got seized. Bitcoin never has. Cathy's own words: Bitcoin is low right now. Their conviction has not diminished. If you think ARK's $710 base case deserves more attention than it's getting, hit subscribe and drop a comment: bear, base, or bull case. Where do you land by 2030? See you in the next one.