Cathie Wood just doubled her Bitcoin price forecast by $1 million. Is she right?

Nearly two years ago, Cathie Wood of Arc Invest predicted just that Bitcoin (Bitcoin 1.21%) The price of Bitcoin will reach $1 million by 2030. This was long before Bitcoin broke through the $100,000 price level, and long before new spot Bitcoin exchange-traded funds (ETFs) were launched in January 2024. This prediction came when Bitcoin. After the crypto winter of 2022, its prospects looked uncertain at best.

In a recent interview with Bloomberg, Wood reiterated this Bitcoin It’s on track to reach $1 million by 2030. In fact, if all goes according to plan, she says, it could reach $1.5 million. Why is Wood so bullish on Bitcoin?

Bitcoin scarcity

Wood says the main factor driving Bitcoin’s price higher is its inherent scarcity. According to Bitcoin’s algorithm, the total lifetime supply is 21 million coins, and 19.8 million coins are already in circulation.

At this point, Wood says, bitcoin is more scarce than gold. The supply of Bitcoin is carefully controlled by its algorithm, and there is no way to increase its production, as is the case with gold.

Increasing demand for Bitcoin

This limited supply is important because the demand for Bitcoin is on the rise. Everyone is suddenly racing to own Bitcoin, and this demand will help boost the price of Bitcoin, given the relatively stable supply.

To come up with her original $1 million Bitcoin price prediction, Wood deployed a basic model to estimate its future price. According to Ark Invest, there are several different fundamental elements driving demand for Bitcoin.

One of these key elements is demand from institutional investors, who are choosing to allocate more of their portfolios to Bitcoin. Now that Spot Bitcoin ETFs Available to investors, institutional investors have a useful tool to calibrate their exact exposure to Bitcoin. In its original model, it used a 2.5% base case allocation to Bitcoin. She says that in a best-case scenario, institutional investors may choose to allocate up to 6.5% of their portfolios to Bitcoin.

Another cornerstone is the growing demand for Bitcoin as a long-term store of value. Until recently, the idea of ​​replacing “digital gold” (i.e. Bitcoin) with physical gold had not really taken off. But now, more investors are buying into the idea of ​​Bitcoin as a hedge against inflation.

Another building block is what Wood refers to as the “nation-state treasury,” which is the demand coming from central banks and sovereign governments. Around the world, nation-states are considering holding Bitcoin as a reserve asset.

The most recent example is President-elect Donald Trump’s campaign promise to create a strategic reserve of Bitcoin for the United States. Under the current outline of this plan, the US government would commit to purchasing 1 million bitcoins over a five-year period, with a proposed holding period of 20 years. Several US states – including Texas, Florida and Pennsylvania – have also said they will create their own strategic bitcoin reserves, so the momentum for government ownership of bitcoin continues to build.

Is it possible for the market capitalization to reach $20 trillion?

Simply put, a Bitcoin price of $1 million indicates a future market value of more than $20 trillion. This would easily make Bitcoin the most valuable digital asset in the world. That would mean Higher valuation for Bitcoin than any tech stock By a large margin. Currently, the most valuable technology stocks in the world are… appleWorth $3.7 trillion.

Things have to go well for Bitcoin to reach a market cap of $20 trillion. As we saw with Bitcoin’s recent pullback below the $100,000 price level, even the slightest hint of concern from the Federal Reserve could be enough to push the price of Bitcoin back down. Additionally, since it is not clear how Trump will implement his cryptocurrency promises, you can understand why some investors remain skeptical about Bitcoin.

But here’s the thing: It’s impossible to ignore the growing demand for Bitcoin from retail investors, institutional investors, corporations, and governments. This is why I remain optimistic about Bitcoin’s long-term trajectory. Simply put, there is too much demand chasing too little supply, and this will push prices higher in the long term.