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

Published November 3, 2023 1:50 PM

By Teuta Franjkovic

Edited by Giuseppe Ciccomascolo

Wood says Bitcoin is now the best investment

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.

So, why is US employment still so strong, supporting the government’s point of view? In our view, labor hoarding after two years of vacancies is a reason on the demand side, while loss of purchasing power – especially food and energy – is a reason on the supply side, BUT…

— Cathie Wood (@CathieDWood) October 26, 2023

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.

Don’t be surprised when #Bitcoin goes to $1 million post spot ETF approval. Market cap doesn’t increase linearly ($1 BTC buy doesn’t make market cap go up $1), there’s a multiplier effect.

— Samson Mow (@Excellion) November 1, 2023

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.”

…if we are right that prices are about to unravel and crush margins, then companies will be forced not only to lay off excess labor but also to harness AI and other automation to salvage margins. Innovation solves problems and gains traction during tough times!

— Cathie Wood (@CathieDWood) October 26, 2023

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.

Speculators are buying #Bitcoin now because they think other speculators are waiting to buy a #BitcoinETF . They will soon discover that there are far more speculators waiting to sell then waiting to buy!

— Peter Schiff (@PeterSchiff) October 23, 2023

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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About the Author

Teuta Franjkovic

Teuta is a seasoned writer and editor with more than 15 years of experience. She has expertise in covering macroeconomics and technology as well as the cryptocurrency and blockchain industries. She has worked for several publications as a journalist and editor, including Forbes, Bloomberg, CoinTelegraph, Coin Rivet, CoinSpeaker, VRWorld and Arcane Bear. Teuta began her professional career in 2005, working as a lifestyle writer at Cosmopolitan in Croatia. From there, she branched out to several other publications, covering mainly business and the economy. She then turned her attention to the world of cryptocurrency and blockchain, believing that crypto is among the most important inventions in the history of humanity. Her involvement in fintech began in 2014 and she has since lent her expertise in writing, editing and gathering information about the world of crypto, blockchain, NFTs and Web3. An all-round news hound, mentor, editor, and writer, Teuta enjoys teamwork and good communication. She holds a WSET2 diploma and has a thing for chablis, punkrock music and shoes. She also holds a double MA in Political science and Entrepreneurship.

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