Cathie Wood sees bitcoin at $500,000
Ark Invest founder Cathie Wood sees the price of bitcoin surpassing $500,000 in the next five years.
She made this explicit yesterday when speaking on CNBC’s Squawk Box television programme.
“We believe that the price will be tenfold of where it is today so instead of $45,000 over $500,000,” says @CathieDWood on her #bitcoin price target over 5 years to @andrewrsorkin at @SALTConference. “Our confidence in ether has gone up dramatically.” pic.twitter.com/bIPyLRv6yg
— Squawk Box (@SquawkCNBC) September 14, 2021
Bitcoin’s cycles and its growth in value
The reasoning behind this prediction refers to Bitcoin’s four-year cycle.
This cycle is marked by halvings, the reduction in half of the reward given to the miners who succeed in mining a block on the Bitcoin blockchain.
This reward is the creation of a certain fixed amount of BTC for each block, which is halved every 4 years or so.
This is effectively Bitcoin’s monetary policy since all existing BTC in the world have been created in this way, and presumably, by 2140 no more BTC will be created, upon reaching the fateful threshold of 21 million bitcoin created.
To be fair, to date an average of only 3 years and 10 months has elapsed between halvings, but the price has been affected by this timeframe on a four-year cycle.
The gradual line of halvings
The first halving took place in November 2012, when the price had already soared from around $0.05 in mid-2010 to around $12 on 28 November 2012.
The following year, however, the first major annual bull run was triggered, culminating in a speculative bubble at the height of which the price exceeded $1,100.
The second halving occurred in July 2016, with the price of bitcoin returning above $600 after collapsing to $170 the year before.
The following year triggered the second major annual Bullrun, culminating in a speculative bubble at the height of which the price touched $20,000.
After returning to around $3,200 in 2018, the third halving took place in May 2020, triggering the fourth bitcoin cycle which is still ongoing.
At the time of the halving, the price was below $9,000, but by the end of the year, it had already returned to its previous highs. In 2021, it seems that a bull run lasting more or less a year is occurring once again, which took the price of BTC first to new all-time highs in mid-April, at almost $65,000, and then now above the $45,000 referred to by Wood.
Cathie Wood’s hypothesis on Bitcoin: cycles and the big annual bull run
The hypothesis is that once the current cycle ends with the next halving, which is expected to take place in early 2024, a new bull run could be triggered that could take the price of bitcoin above $500,000, according to Cathie Wood’s hypothesis.
According to the founder of Ark Invest, companies will continue to diversify their savings using inflation hedging assets such as bitcoin, and institutional investors will start to allocate 5% of their funds in BTC or other cryptocurrencies.
Thanks to these dynamics, the next cycle could see the price of bitcoin jump an order of magnitude higher than it is today, as it did during the third cycle that ended in May 2020, and as it could still happen during the cycle still in progress, which will presumably end in early 2024.