Bitcoin Investors Are Digging In

by Feb 28, 2023Articles


At Vanguard offices, we’ve been pouring over a fresh new report.

It spells out the big breaking investment stories for 2023, according to Cathie Wood and her crowd at Ark Invest.

Cathie Wood has a complicated reputation.

She believes that we are witnessing a step change in human ingenuity, with several powerful new technologies emerging that could transform society (and make investors vast returns in the process).

Her reports often include outrageous predictions.

And that’s definitely true with this report.

One of the biggest investment stories in the report is “Public Blockchains” – she’s talking about Bitcoin and Ethereum here.

And true to form, Wood makes a big prediction for Bitcoin.

Ark believe that BTC will be worth $680,000 by 2030.

And that there is a more optimistic scenario where it breaks through $1m.

Yes, that might sound absurd at this point.

(The crypto market is still in recovery mode, with BTC tipping along around $20,000).

But we’ve already seen how fast Bitcoin has been adopted.

Investors recognise a secure and valid store of wealth, especially for those in struggling economies.

It cannot be manipulated, counterfeited or otherwise meddled with by governments, corporations or any one individual.

In fact, Bitcoin was designed as “digital gold” from the outset. The supply of bitcoin is fixed, capped at 21 million units.

So far, 18 million units have been created and the supply will be continually reduced as it follows a mathematically metered, predictable, and predefined schedule.

In the near future, if Bitcoin were to take just 25% of gold’s market cap, it would scale towards a market cap of $2.5 trillion.

That investment case has seen Bitcoin perform better than any other investment over the last decade, and it’s delivered a steady return over the last five years or more.

Source: Ark Invest

Bitcoin is a store of value, and we could point to several other uses cases as well.

Bitcoin can be used to make digital payments to merchants who accept it as a form of payment.

And it can also be used to transfer money internationally quickly and easily, without the high fees associated with traditional wire transfers.

While the price has dropped a lot in the last year, Bitcoin’s long-term opportunity is strengthening.

That, I think, is the most useful takeaway from the Ark report.

The chart below shows how holders of BTC have become more long-term focused.

The number of Bitcoins that have not been used in the six months has risen steadily. Long term holders now hold 71% of coins in circulation.

Source: Ark Invest

That implies a very healthy network of long term investors.

Which is great.

But it doesn’t really tell the whole story.

Bitcoin might be in the oldest cryptocurrency, constantly in the news as it swings from one week to the next.

Key Takeaway

But in terms of adoption it still has a long way to go.

Consider the fact that:

> 4 billion people live under authoritarian regimes.
> 2 billion people suffer from double-digit inflation.
> 1 billion people cannot use traditional payment transfer apps.
> 1 billion people rely on remittances.

For these people, Bitcoin is a great story of value.

It can’t be seized.

And this is the main reason why Ark thinks BTC could be worth $680,000 by 2030.

Bitcoin is a store of value: one that is not subject to government or financial institution control.

And that investment case remains intact:

“We believe Bitcoin’s long-term opportunity is strengthening. Despite a turbulent year, Bitcoin has not skipped a beat. Its network fundamentals have strengthened and its holder base has become more long-term focused.

Contagion caused by centralized counterparties has elevated Bitcoin’s value propositions: decentralization, auditability, and transparency. The price of one bitcoin could exceed $1 million in the next decade.”

Despite various risks –  inflation, war, regulation – investors in Bitcoin are digging in and getting ready to hold for the long term.

That includes me.

Happy holding.

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