This near-term sentiment didn’t dissuade high-profile growth investor Cathie Wood from placing an astronomical price target on Bitcoin. Wood believes it could surge 1,000%, adding another $500,000 to the token’s existing price around $50,000 today.
Today, headlines suggesting that key Bitcoin mining jurisdictions, such as Kazakhstan, could become less friendly to miners have some concerned about the bearish regulatory stance that’s increasing among regulators of large crypto mining markets. China has already cracked down hard on crypto mining, with the U.S. also apparently looking into the environmental impacts of this energy-intensive activity.
But Bitcoin bulls like Cathie Wood appear to be looking past this negative near-term catalyst. She believes that institutional adoption of Bitcoin could propel it to much higher levels.
Wood argues that despite what appear to be high levels of correlation among Bitcoin and other risk assets during this omicron-related market dip, the digital currency is actually a “low correlation” asset. Institutional investors looking for portfolio diversification may adopt Bitcoin rapidly, to improve risk-adjusted returns. Wood cites relatively low institutional exposure to crypto, and Bitcoin’s status as a top cryptocurrency, as reasons this token in particular could see massive capital inflows.
The idea that institutional money is likely to flow into Bitcoin first is not necessarily a fringe view. The recent capital inflows into Bitcoin as a result of various ETFs and other investment products targeting Bitcoin are certainly something to watch. It is possible that Bitcoin’s longer-term track record in the crypto market could be the catalyst for increased portfolio adoption.
However, the jury remains out on the extent to which Bitcoin moves in low correlation to other speculative risk assets. This is something that investors have pondered for some time, as well as the volatility of this overall sector.
Wood set a big price target, and whether she is ultimately proved right in her 10-bagger prediction remains to be seen. However, institutional adoption of Bitcoin will likely continue to be a key catalyst that investors watch when assessing the cryptocurrency.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.