Bitcoin has slid 47% over the past year, but has rebounded 36% over the past month to $23,019.
Famed investor Cathie Wood, chief executive of Ark Investment Management, has been a bitcoin evangelist for quite some time, and she’s not pulling back now.
Ark sees huge gains for the world’s biggest digital currency by the end of the decade. Ark analysts cited several bullish factors in a research report.
Bitcoin plunged 77% from its November 2021 peak of $69,000 to its November trough of $15,797. But, “despite severe drawdowns, bitcoin has outperformed every major asset class over longer time horizons,” Ark analysts said.
For the five years through 2022, bitcoin posted a compound annualized return of 8.7%, compared to 6.1% for global equities, negative 1.7% for global debt, and 7% for gold.
Meanwhile, “bitcoin’s fundamentals are stronger today than in past drawdowns,” Ark said. Among those fundamentals: bitcoin had a market capitalization of $393 billion as of Nov. 21, compared to $58 billion about five years earlier.
Also, “bitcoin capitulation has hit levels associated with price troughs in the past,” Ark said. “In 2022, the [amount] of bitcoin’s supply trading at a loss peaked at 68.3%, exceeding that in every previous bear market.”
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Ark Sees Plenty of Long-Term Bitcoin Investors
Further, “bitcoin holders are more long-term focused than at any point in history,” Ark said. Its demarcation for long-term is 155 days.
“The number of bitcoin not moved in about six months is the threshold at which the probability of selling diminishes dramatically,” Ark said. “At year-end 2022, long term holders owned 71% of total bitcoin supply outstanding.”
In addition, “exchanges have increased transparency in response to the collapse of trust in centralized crypto entities,” Ark said.
Exchanges Indicating Solvency
It cited 11 exchanges that are publishing “proofs of reserves,” which are indications of solvency. The exchanges include heavyweights Coinbase Global and Binance.
Moreover, “bitcoin’s hash rate — the number of computations per second produced by miners and a proxy for network security — has increased for 12 consecutive years, hitting an all-time high in 2022,” Ark said.
So how high is bitcoin headed? Ark’s bearish case is for the digital currency to reach $258,500 by year-end 2030, a 40% compound annualized gain from Dec. 31, 2022.
The base case is bitcoin at $682,800, a 60% annualized gain. And the bullish case is bitcoin at $1.48 million, a 75% annualized gain.