Cathie Wood Blames Bitcoin’s Fall on ESG and Elon Musk

All it would take for bitcoin to reach a value of $500,000 would be for institutional investors to allocate just 5 percent of their portfolios to the cryptocurrency, according to Cathie Wood.

The high-profile founder of ARK Investment Management believes that allocation is realistic, given that institutions have approximately that amount of their portfolios invested in categories such as emerging markets. A five percent allocation would amount to about $2 trillion flowing into bitcoin. (One bitcoin is now worth almost $40,000.)

Speaking at the Robin Hood Investors Conference this week, Wood said her case is bolstered by the increasing number of people in developing countries who view cryptocurrencies as an insurance policy against governments confiscating their wealth, either directly or indirectly through inflation, as well as through capital controls. Wood said “smart countries” will ultimately get behind bitcoin, according to an attendee who was at the conference. 

In an interview with Lee Ainslie, head of hedge fund Maverick Capital, Wood talked about ARK’s investment process, which is focused on disruptive innovation and five transformational platforms: DNA sequencing, robotics, artificial intelligence, energy storage, and block chain. The conversation covered everything from Tesla to cryptocurrencies. 

Wood, whose ARK Investments is one of the fastest growing U.S. fund managers, attributed the recent downturn in crypto to environmental, social, and governance investors; the realization of how much electricity it takes to mine bitcoin and the work that it will take to change that system; and Tesla CEO Elon Musk giving bitcoin what Wood described as “a second thought.”

Musk sold $100 million out of a total of $1.5 billion in bitcoin investments, according to Wood. She said she believes that Musk hasn’t sold more since and that he will come back to bitcoin when merchant power producers start housing bitcoin mining machines. The power producers, such as Talen Energy, will be able to offload excess power coming out of batteries in order to create a renewable energy ecosystem faster than they would be able to otherwise, said the ARK founder, according to the attendee. 

Wood also said that policymakers and governments will have a difficult time shutting down bitcoin miners and exchanges, as these people and companies will only migrate to other countries that are more supportive of crypto. Wood added that the competition between countries fighting to be innovation leaders as well as politicans’ fears of being blamed if they raise barriers to “the next big thing” is also good for the digital currency, according to the attendee.

According to Wood, many government leaders are beginning to understand just how important it is to embrace crypto, particularly when it comes to decentralized finance. Without DeFi, banks and other institutions, already under pressure from new competitors, won’t be able to lower costs and they’ll be “disrupted even faster,” she said.