ARK Invest Management CEO Katie Wood, caught in the spotlight by a series of successful investment decisions, argues that bitcoin has not yet exhausted its growth potential. This, she said, is driven by limited supply and increasing demand.
“If we add up all the potential demand with the limited supply, we get incredible values in the long run. This is just the beginning. A trillion dollars is nothing compared to where it ends up, ”Wood said.
As evidence of the growing demand, she pointed to the inclusion of bitcoin in the reserves of several recognized participants in the financial markets:
“I think the most interesting developments in recent times, and we did not foresee them when we prepared our institutional report, is that companies are now diversifying their cash reserves with Bitcoin. Square and Tesla did it. MicroStrategy is building its business around this. ”
Wood believes that Bitcoin has become the “first new asset class” that has a low correlation with other markets and is therefore attractive to investors.
“The correlation of returns with other asset classes is extremely low. According to our analysis, the highest correlation of 0.34 is with real estate. Asset managers in all sectors are looking for non-correlating assets. We truly believe that this is the first new asset class, a truly new asset class, since the 1600s. Since the inception of the shares, ”she added.
For investors looking to increase portfolio returns through greater exposure to risks, Wood recommends taking a closer look at Bitcoin.
“We conducted a study, it is published on our website, about institutional participation. I think we’ve done a million Monte Carlo simulations. If institutions use this analysis when they want to, for example, minimize volatility or, to the other extreme, maximize the Sharpe ratio, they should probably invest between 2.5% and 6.5% of their portfolio in Bitcoin, ”she said.
At the same time, Wood urged American investors to refrain from selling and transferring bitcoins until the IRS provides them with appropriate guidance.
“The IRS has to say something about this. If you have huge profits in bitcoin, if I were you, I would not move them until we have some changes on the tax front, ”advised the CEO of ARK Invest.