Janice R. Andrews
With a market capitalization of more than $1.35 trillion, and a current price of over $68,500, Bitcoin (CRYPTO: BTC) is the most valuable cryptocurrency in the world. Interestingly, more than half of the market capitalization of the whole cryptocurrency ecosystem—roughly $2.55 trillion—is accounted for by Bitcoin. But, Cathie Wood, the inspirational head of Ark Investment Management, believes that Bitcoin has much more promise in the future. By 2030, Bitcoin may increase 2,115% to about $1.5 million, based on Ark’s estimate. More optimistically still, Wood recently predicted that the price of Bitcoin may soar to an incredible $3.8 million, a 5,453% increase.
Is Cathie Wood’s Prediction for Bitcoin Accurate?
Although investor interest in Bitcoin and the cryptocurrency space as a whole is still strong, mainstream adoption is still a ways off. This begs the question: How plausible is Wood’s most recent forecast?
Bitcoin May Never Be a Replacement for Paper Money
Because bitcoin is decentralized, its proponents contend that it has a great chance of unseating paper money. Bitcoin is not governed by a single party, in contrast to fiat currencies, and its blockchain-based ledger is transparent and accurate.
The idea that Bitcoin may displace current currencies is questionable, though, for a number of reasons. Controlling the money supply by the government is an essential instrument for maintaining economic stability in tumultuous times. Certain currencies are stronger than others because different economies run at different rates. A vital tool for preserving competitiveness would be lost for many exporting nations if all nations adopted a single currency, such as Bitcoin.
Think about the case of two nations that export oil but have varying production costs. Price disparities are lessened by a declining currency, enabling both to compete globally. The significance of having unique national currencies was also made clear in the 2016 Brexit crisis. The British pound fell 16% compared to the US dollar as investors braced themselves for economic difficulties stemming from decreased trade, which immediately increased the UK’s export competitiveness.
Countries would need to come to an agreement on a single government and shared economic objectives in order for Bitcoin to become a universal currency. This is a very unlikely situation given the state of geopolitics today.
Limited Business and Consumer Adoption
Since so few companies now take Bitcoin as payment, there is little reason for customers to store it other from speculation. Cryptwerk reports that just 9,449 retailers accept Bitcoin, a negligible percentage of the more than 300 million registered enterprises worldwide.
One further significant barrier is the volatility of bitcoin. In 2022, it plummeted by 65%, and in 2023, it surged by 255%. Due to its volatile pricing, Bitcoin is not a viable option for companies that require consistent cash flow management.
Eight possible use cases for Bitcoin are listed by Ark Invest, the most of them have to do with payments and transactions and might spur adoption by 2030. However, widespread acceptance in these fields is improbable for the above noted reasons. Alternatively, according to three of Ark’s use cases, Bitcoin may be utilized as a store of value:
- Digital Gold: According to Ark, Bitcoin may be seen as digital gold and draw demand from a range of markets. Bitcoin’s decentralized structure and steady growth trajectory bolster its potential as a store of wealth, even in the face of turbulence.
- Corporate Treasury: In order to protect themselves from inflation, businesses may retain a limited amount of Bitcoin on their balance sheets if they believe it to be a store of value.
- National Treasury: If Bitcoin establishes credibility as a store of value, it may be added to national reserves, just like central banks keep actual gold.
The Case for Store-of-Value and the Future of Bitcoin
Wood emphasized the recent introduction of Bitcoin exchange-traded funds (ETFs) as a spur for institutional demand at the Bitcoin Investor Day conference in March. This is a major factor in her prediction that Bitcoin will surpass Ark’s $1.5 million aim and reach $3.8 million by 2030.
Nonetheless, Wood’s estimate of $3.8 million per Bitcoin suggests a market capitalization of $79.8 trillion, which is almost three times larger than the whole US economy and 25 times larger than Microsoft, the biggest corporation in the world. These numbers appear implausible because ETFs by themselves do not qualify Bitcoin as a currency that can be widely used.
It’s possible that Bitcoin’s market capitalization, which is currently at $15.7 trillion, may eventually surpass that of gold as a store of value. This suggests that the price of Bitcoin would reach about $817,000, which would be a 1,094% increase over its current value. So, although Bitcoin may potentially yield significant returns if adopted as a store of value, Wood’s forecast of a 5,453% increase seems excessively optimistic.
Although Cathie Wood is optimistic about Bitcoin’s future and sees large increases ahead, there are a number of real-world obstacles that make her prediction implausible. Given the significance of national currencies in economic management and competition, it seems unlikely that Bitcoin will displace conventional currencies. Furthermore, because of its volatility, companies and consumers still use Bitcoin at low rates.
The potential of bitcoin as a store of value might raise its price, but it appears unlikely that it would reach $3.8 million by 2030. A more likely possibility is that Bitcoin will hit a price of about $817,000, which would represent its value as digital gold. Investors assessing the long-term prospects of Bitcoin should exercise caution and take these issues into account.
