The average investor likes to turn to the professionals when it comes to finding potentially lucrative investment ideas. Given her standing as an expert in the area of disruptive and innovative businesses, it makes sense why Cathie Wood is closely watched.
Wood and her firm, Ark Invest, are incredibly bullish on a top cryptocurrency that they believe could skyrocket $3.8 million by 2030. This is a truly lofty target that would catch anyone’s attention.
But does this mean the digital asset is a no-brainer buy?
Sky-high expectations
In January of this year, Cathie Wood set a 2030 price target for Bitcoin (CRYPTO: BTC) of $1.5 million. Based on this leading digital asset’s price of $44,000 at the start of 2023, this would imply a whopping 34-fold gain over the next seven years. This outlook was provided right after the highly anticipated approval of Bitcoin spot exchange-traded funds (ETFs).
More recently, in March, Wood upped her price target, now saying that if institutions were to allocate 5% or more of their portfolios to Bitcoin, it could soar to $3.8 million per coin. At that level, the asset would carry a monster market cap of $75 trillion, making it about three times more valuable than U.S. GDP.
And it implies that Bitcoin could rise almost 58-fold in the next seven years from its price on May 16, translating to an annualized gain of 79%. This would undoubtedly outperform probably every single asset out there.
Besides the ETF approvals, Ark Invest points to the recent halving as a key catalyst that can drive the price higher over the next 12 to 18 months, just as it has done in previous cycles. More clarity from regulators can also help drive institutional adoption.
Wood calls out how Bitcoin can help diversify one’s portfolio. And it’s hard to argue with Bitcoin’s historical track record, rising 800% just in the past five years, of significantly raising one’s purchasing power.
Should you buy Bitcoin?
Cathie Wood and Ark Invest are known for making outlandish projections that make you scratch your head and wonder just how likely these outcomes are. I view the Bitcoin price target of $3.8 million in the same way. In my opinion, it could just be a marketing ploy to raise more assets for her firm’s Bitcoin ETF product. This means investors should temper their expectations.
But to be clear, just because Bitcoin probably won’t rise 79% per year between now and 2030 doesn’t mean investors should completely discard it. I believe this crypto should still be on every investor’s radar, particularly those who have a long time horizon. If you’re someone who’s close to or in retirement, then perhaps it’s best to stay away.
This is an asset that investors should only buy if they plan to own it for the next five to 10 years, at least. It can take a long time for things to play out with blockchain technology as well as regulatory developments. And the vast majority of capital out there isn’t even anywhere close to 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 happen. Bitcoin has experienced multiple drawdowns in the past of greater than 50%. This just means you should only put as much money in that results in you not losing sleep at night when sizable price swings happen.
Hoping that Bitcoin reaches $3.8 million per coin seems like a pipe dream. Regardless, this top crypto could still work out as a very successful investment over time.
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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
1 Top Cryptocurrency That Could Soar 5,700%, According to Cathie Wood. Is It a Buy? was originally published by The Motley Fool