Cathie Wood Explains ARK’s False Bitcoin Assumptions
The founder and CEO of ARK Investment Management said Thursday that she and her team misjudged the adoption of cryptocurrency — or at least the timing — by corporations and governments. Your company has invested heavily in Bitcoin and continues to bet on its eventual rise to meteoric heights.
“We’ve softened a few assumptions,” she told Bloomberg Radio on Thursday. “We thought that led by Tesla, Block (formerly Square) and MicroStrategy, more companies would add Bitcoin to their balance sheets. We scaled that down significantly. And the same goes for nation states.”
Bitcoin lost nearly 65% of its value over the course of 2022, ending the year at around $16,500. It currently sits at just over $23,500.
Unsurprisingly, companies holding bitcoin have taken a hit over the past year. Tesla, for example, said in a regulatory filing this week that it recorded a $204 million impairment loss on its Bitcoin holdings in 2022. When the cryptocurrency collapsed, it sold 75% of its holdings over the past year.
Meanwhile, few governments have been eager to follow the lead of El Salvador, which became the first country to adopt bitcoin as legal tender in 2021. A Bloomberg article last November was headlined, “El Salvador’s $300M Bitcoin ‘Revolution’ Fails Miserably.”
“Other countries probably aren’t going to move as quickly as they might have if El Salvador had had a big swoosh off the bat,” Wood said. “We think it’s going to happen, we just pushed it off a bit.”
As for the reasons for this, she pointed to the inflation and tax crises people have suffered due to governments’ monetary responses to the pandemic. “Now where do these people go to insure themselves against an implosion of their purchasing power and wealth? It’s something like bitcoin. Bitcoin is an insurance policy,” she said.
Wood acknowledged that 2022 was a “terrible year for all things crypto.” But she said it was “the centralized, opaque players” like crypto exchange FTX that went bankrupt. In contrast, Bitcoin “is a rules-based digital monetary system, and it’s global, and there’s no human intervention,” she said.
FTX founder Sam Bankman-Fried disliked bitcoin because “it’s transparent and decentralized. He couldn’t control it,” Wood said in December.
Wood maintains her forecast that Bitcoin will experience a rapid increase in value in the coming years. In five years, she said, it’s going to “reach about $670,000, something like that, and then by 2030, when we see more use cases and more of these insurance policies being written against fiscal and political systems that aren’t healthy, think.” we it could happen a million bucks.”
Many doubters have questioned her prediction. As Bloomberg anchor Carol Massar pointed out to Wood, “People say to me, ‘Really? Does she really stick to it?’”
Mark Mobius, the billionaire co-founder of Mobius Capital Partners, predicted in December that Bitcoin would fall to $10,000 sometime this year.
And this week, Warren Buffett’s right-hand man, Charlie Munger, argued in one Wall Street Journal op-ed that a “cryptocurrency is not a currency, commodity or security. Instead, it is a gambling contract with an almost 100% house edge.”
Munger, who once called bitcoin “rat poison,” said the US should follow China’s lead and enact legislation that would prevent both crypto trading and the formation of new cryptocurrencies.
Learn how to navigate and build trust in your organization with The Trust Factor, a weekly newsletter exploring what leaders need to succeed. Login here.
