Cathie Wood, the US star fund manager and founder of Ark Investment Management, has said bitcoin is currently in its “prime time” and has predicted demand from institutional investors will propel the crypto currency’s market cap well beyond the $1tn mark.
Ark, which manages more than $50bn across seven US-listed ETFs, has exposure to bitcoin via its Next Generation Internet ETF. According to most recent holdings data, the $5.3bn active ETF has more than 5% of its assets allocated to the Grayscale Bitcoin Trust, its second largest holding after Tesla.
Wood said Ark first began investing in the bitcoin trust in 2015.
“We are now moving into what I believe will be prime time. Helping it along is the demand from institutional investors,” said Wood.
Bitcoin is currently trading at just over $51,000 with a market cap of around $950bn.
Ark’s own research and portfolio simulations covering data over a 10 year period show that if institutions want to minimise volatility and maximise returns, they should consider allocating between 2.55% and 6.55% of their portfolios to bitcoin.
“The reason is the correlation of returns to other classes is extremely low,” said Wood, who was speaking on a webcast on 25 March organised by Cboe.
Ark’s research also showed that institutional allocations between 2.5% and 6.5% could impact bitcoin’s price by $200,000 to $500,000.
Wood, who suggested bitcoin was “the first new asset class since the 1600s, since equities”, also pointed to companies diversifying their cash with bitcoin, including Tesla.
Tesla chief executive Elon Musk said on 24 March that the company’s electric cars can now be bought using bitcoin, adding they would not be converted to cash on receipt. The company revealed in an 8 February regulatory filing that it has bought $1.5bn of bitcoin, sending the price of the cryptocurrency soaring.
“If we add all the potential demand, relative to the limited supply, we come up with incredible numbers over the long term. We think $1tn is nothing compared to where this ultimately will be,” said Wood.
Other US asset managers are exploring product launches to gain exposure to bitcoin.
Fidelity Investments unveiled plans on 24 March to launch a bitcoin ETF, which are waiting for approval from the Securities and Exchange Commission.
The SEC has repeatedly rejected applications for bitcoin ETFs, but the industry remains hopeful some funds will eventually win approval.
Van Eck Associates filed its bitcoin ETF proposals with the US financial regulator at the end of last year. The SEC is now assessing the plans.
Speaking at the Cboe event, CEO Jan van Eck said: “Crypto Wall Street is an incredible disruptive threat to traditional banks and financial institutions.”
He added: “You can earn interest on bitcoin now. That will suck capital into the ecosystem.”
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