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Bitcoin a Decade Long Hodl: Cathie Wood’s Reasons for Backing BTC Over Everything

Last Updated November 3, 2023 1:50 PM
Teuta Franjkovic
Last Updated November 3, 2023 1:50 PM

Key Takeaways

  • Cathie Wood believes Bitcoin is the best hedge against the risk of deflation over the next ten years.
  • Ark Investment leader expects a period of falling prices driven by technological advancements.
  • She considers Bitcoin as a strong hedge against both inflation and deflation, referring to it as “digital gold.”

In the last ten years, Bitcoin has surged into the limelight as the leading cryptocurrency. During this journey, various narratives have emerged to support the notion of investing in Bitcoin.

One such narrative compares it to “digital gold” because, akin to gold, it can function as a means of preserving value and serve as a safeguard against inflation.

Cathie Wood Favors Bitcoin as “Digital Gold” Hedge

To hedge against the risk of deflation in the upcoming ten years, Cathie Wood says  she would categorically bet on Bitcoin rather than gold or cash.

Even as markets have focused on a new era of heightened inflation risks, the head of ARK Investment Management reiterated her view that she expects an era of falling prices, supported by new technologies like robotics, electric vehicles, blockchain, artificial intelligence, and genomic sequencing. She has held this opinion since 2021.

When asked which of the three asset classes she would pick to hold for ten years, Wood responded , “Bitcoin, hands down.” Due to its little involvement from institutions and lack of counterparty risk, bitcoin is a hedge against both inflation and deflation. “Digital gold,” as she put it.

Wood has been one of the more upbeat commentators on cryptocurrencies. She believies that they will gain from the broader advancements and expansion of new technology. She had before forecast that within the next ten years, the price of Bitcoin would surpass $1 million . It is currently $35,000, or around half of its peak in 2021.

SEC Eyes Bitcoin ETFs And Wood May Benefit

Nevertheless, Bitcoin’s value has more than doubled this year after plunging 64% in 2022 as a result of market participants praising it as a possible inflation hedge, even though it did not function as one amid the largest consumer price spike since the early 1980s.

The US Securities and Exchange Commission may soon authorise exchange-traded funds that invest directly in the coin, according to recent bets, which have caused the token to surge.

Wood is one of the people most likely to gain from ETF approvals. Her company has invested in the Grayscale Bitcoin Trust and submitted an application for a Bitcoin ETF with 21Shares. GBTC was purchased by Wood’s $1.2 billion ARK Next Generation Internet ETF in November of last year, at a roughly 40% discount.

The trust, which is the fund’s largest position, has returned over 224% so far this year as of Wednesday. In comparison, the rise in Bitcoin is about 114%. Last month, ARK sold a portion of its GBTC assets.

Wood stated on the programme that she anticipates a convergence between Bitcoin and AI. This is “going to enable a division of labour and microtasks globally in a way we can’t even imagine now.”

Peter Schiff Warns of Bitcoin’s Peak Amid SEC Buzz

Peter Schiff, a prominent advocate for gold investments, recently shared his views on the current state of Bitcoin trading and the potential consequences of the Securities and Exchange Commission (SEC) greenlighting a Bitcoin Exchange-Traded Fund (ETF).

Schiff cautioned that any discussions regarding ETF approval could potentially signify the pinnacle of the Bitcoin uptrend. He stated :

“Bitcoin is currently priced at $35K, with speculators placing their bets on the SEC’s approval of GBTC transforming into an ETF. If such talks occur, it is likely to mark the peak of the rally, unless Bitcoin experiences a decline before approval. The magnitude of the decline will be less significant if the ETF conversion is once again denied.”

Schiff warned  Bitcoin investors in another X post about the possible dangers and traps that could arise, especially in light of the recent excitement surrounding the creation of a Bitcoin ETF.

Complementary or Substitutive?

The question of whether Bitcoin will eventually replace gold as the ultimate store of value may not be entirely fitting, as there’s a likelihood that both can and will coexist as complementary assets. Just as it’s customary in various investment sectors, the Bitcoin versus gold choice will ultimately depend on the individual investor’s risk profile.

When it comes to constructing a well-balanced portfolio, diversification is key. It involves holding a variety of assets that may not necessarily exhibit correlated movements.

Bitcoin, akin to gold, has emerged as an alternative investment choice for certain investors, offering a spectrum of potential applications. Its viability as an investment hinges on employing a suitable strategy.

The better choice between the two depends on factors such as risk tolerance, investing approach, available capital, and capacity to withstand potential losses. Bitcoin’s significantly higher volatility in comparison to gold renders it a riskier investment option.

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