Innovation Stocks “Nowhere Near A Bubble,” And Ether “Even More Undervalued Than Bitcoin,” Says Cathie Wood

“Here we are, ready for primetime, and we got all this fear and uncertainty and doubt. As a portfolio manager, I actually love that backdrop," said Ark Invest, CEO.


Cathie Wood, founder, and CEO of Ark Investment Management, said Bitcoin could soar to $500,000 as institutions increase their allocation to the leading cryptocurrency by as much as 5%.

“Institutions are moving in,” Wood told CNBC.

“To some extent, this is a new asset class with correlation very different compared to other asset classes. Institutional managers have to look at new asset classes that are evolving and that have low correlation. That’s the … Holy Grail in terms of asset allocation.”

Just this week, Michael Saylor’s MicroStrategy announced that it had purchased another 1,434 Bitcoin for $82.4 million.

This latest purchase was made at an average price of ~$57,477 per bitcoin, while at its current prices, BTC is down 16% from that level. With this, the average Bitcoin entry of the company is $29,860.

MicroStrategy now holds a total of 122,478 BTC, acquired for $3.66 billion.

Ready For Primetime

Bitcoin, meanwhile, is back under $50k ahead of US inflation figures. Traders seem to be already pricing accelerated tapering and an increase in rates with the Federal Reserve, European Central Bank, Bank of England, and Bank of Japan to meet next week.

The risk aversion can also be seen in the stock market, and in tandem, the crypto market is falling today while the dollar continues to trade near a 17-month high. Even gold is getting hammered, trading at $1,770 per ounce.

As of writing, BTC is trading around $48,000, unable to make a strong recovery from last weekend’s sell-off.

ARK Invest’s flagship fund is currently down 19% YTD and has fallen 36% from its record high in February. While some say that these innovation stocks are in a bubble, Wood said, she “couldn’t disagree more.”

“What I like about this period is many people are saying those stocks were in a bubble and they deserve to correct. That tells me we are nowhere near a bubble.”

In fact, following such a correction, Ark’s 5-year compound annual rate of return expectation has gone to nearly 40% today, from 15% at the peak in March, she said. This means Ark expects the innovation stock to quadruple from current levels over the next five years.

“Here we are, ready for primetime, and we got all this fear and uncertainty and doubt. As a portfolio manager, I actually love that backdrop.”

Miles To Go

Talking about BTC, Wood reiterated that the cryptocurrency could go 10x from its current level.

“The move actually by institutions into Bitcoin, if we were to choose Bitcoin and that seems to be their first stop, could add $500,000 to Bitcoin’s price if they move into roughly 5% over time.”

Much like Wood, Mike McGlone of Bloomberg Intelligence says the coin is a risk asset that’s slowly evolving into a digital-reserve asset “in a world going that way,” which should have positive implications for its price.

“The key question nearing the end of 2021 is whether Bitcoin is too hot,” McGlone wrote in a note.

“Our chart shows the crypto fairly priced at about its upward-sloping 50-week moving average.”

Meanwhile, Wood is not only bullish on Bitcoin but also Ethereum, and at its current levels, it could be more underestimated. Ether is currently hovering above $4,000. ETHBTC meanwhile is at 0.0847, down from the 2021 high of 0.886 hit on Thursday.

ARK is “working on” a price target for Ether “right now,” said Wood adding, “the fact that it is the venue, or the protocol, for DeFi and for NFTs suggests to us that it is even more undervalued than Bitcoin is, just because there are new worlds growing up on top of it,” Wood told Fortune on Thursday.

While Ethereum is “in its infancy” and has “miles to go,” she said Bitcoin is “primarily a monetary system.”

As such, she expects institutions to not only move further into Bitcoin but also Ether because of DeFi, a move she thinks is “going to accelerate,” and NFTs.

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