- Cathie Woods is confident that Bitcoin as a new asset class could become a reserve currency.
- The traditional investment portfolio diversification is getting less relevant.
- For institutions, Bitcoin serves as a hedge against growing risks.
Bitcoin represents a new asset class and may serve as a reserve currency in the future, said the founder and CEO of ARK Invest Cathie Wood on Thursday, during an online conference hosted by Bloomberg.
According to Wood, the biggest surprise to ARK Invest in the last year was that, while the firm expected institutional investors to start moving into—despite all the regulatory hurdles—it didn’t expect the diversification on their balance sheet and the diversification of their cash assets.
“That was a positive surprise, and we think this is going to continue,” said Wood.
She also drew attention to the investors’ traditional 60/40 equity-bond portfolio, suggesting that this once magic formula is about to come to an end.
“Look what’s happening to bonds right now. If we are ending a 40-year secular decline in interest rates, that asset class has done its thing. What’s next? We think crypto could be the solution,” said Woods.
While the head of ARK Invest is adamant that the traditional diversification strategy makes sense in terms of cash, she is concerned about the quantitative easing route of the Federal Reserve and its overall monetary policy.
“Fixed income has done 40 years of very hard work,” added Wood. “If Bitcoin represents a new asset class, why not move in it?”
Talking at yesterday’s event, Wood stressed that large corporations like Tesla or Mass Mutual allocating some of their capital in Bitcoin points to the crypto going really mainstream.
“They are using Bitcoin as a hedge against what could go wrong,” she added. “Cash is supposed to be the ultimate risk-off asset of choice and here we have Bitcoin serving that.”
In its annual research report published last month, ARK Invest said that, if institutional investors allocate around 6.5% of their funds in cryptocurrency, the price of Bitcoin could go as high as $500,000.