Cathie Wood Just Slashed Her 2030 Price Target on Bitcoin. Should Investors Be Concerned?

Cathie Wood and her firm Ark Invest, which runs several exchange-traded funds (ETFs), are known for investing in high-growth technology companies that have the ability to significantly disrupt big industries and change the world. Naturally, cryptocurrencies fit right into Ark’s investment thesis, which is why Wood and her team have long been ultra bullish on Bitcoin (BTC 0.55%), the world’s largest cryptocurrency.

But Bitcoin has struggled as of late, and Wood recently slashed her price target on the crypto. Should investors be worried?

Stablecoins have emerged stronger

In April, Ark published research detailing its 2030 price targets for Bitcoin under several scenarios. The bear case was $300,000 per token, representing a roughly 21% compound annual growth rate (CAGR); the base case was $710,000, representing a 40% CAGR; and the bull case was $1.5 million per token, representing a roughly 58% CAGR.

Much of the thesis is based on institutional investment and the rising belief among investors that Bitcoin could serve as a form of digital gold and therefore a hedge against inflation. It may also prove to be a good asset to own as the U.S. government’s financial situation deteriorates with huge piles of debt.

Recently, and perhaps coincidentally as Bitcoin’s price has struggled recently, Wood said in an interview on CNBC that she would slash about $300,000 from her bull case scenario and bring her price target for Bitcoin down to $1.2 million, primarily due to the emergence of stablecoins, which are digital assets pegged to a currency or commodity like the U.S. dollar.

“Stablecoins are usurping part of the role we thought Bitcoin would play,” Wood said. “Given what’s happening to stablecoins — serving emerging markets in the way we thought Bitcoin would — I think we could take $300,000 off of that bullish case [for Bitcoin].”

Wood is certainly correct in this sense, as two stablecoins are now top 10 cryptocurrencies by market cap, and Tether is the third-largest cryptocurrency in the world right now. Part of the reason people may prefer to use stablecoins for money transfers is because they are much less volatile than cryptocurrencies like Bitcoin. The goal of a U.S. dollar-backed stablecoin is to always trade around $1, offering the attractive technology of cryptocurrencies without the volatility.

Still, Wood said she remains extremely bullish on Bitcoin and if the token reaches $1.2 million by 2030, I’m sure any investor would be very happy. Wood is still a big believer in Bitcoin being used as a form of digital gold, and gold has been on an epic run of its own in recent years.

“We were saying digital gold could usurp half of that market (gold) or at least become as big or become additive in some way,” Wood said. “… While I say $300,000 [price target reduction], that would be holding gold constant, let’s say gold has doubled here since we made that forecast, so again there are puts and takes.”

Wood is still bullish, but be cautious of crypto price targets

Wood is undoubtedly still bullish on Bitcoin, primarily on the digital gold thesis and institutional adoption, which she continues to think will grow, given that Bitcoin is the leader in a new asset class and a technology all wrapped together. But as I’ve said in the past, I think investors should be cautious when it comes to long-term price predictions for Bitcoin or any cryptocurrency. The sector is still relatively new, and it’s more difficult to value than publicly traded stocks.

I still think Bitcoin is one of the few cryptocurrencies that investors can hold long term because it appears to provide a unique diversifier that very few assets can replicate. Investors can definitely allocate some capital in their portfolios to Bitcoin, but how much depends on your risk tolerance because — as we’ve seen this year — the world’s largest cryptocurrency is still quite volatile.