Cathie Wood explains ARK’s wrong Bitcoin assumptions | Fortune

Cathie Wood is finally admitting she got some things wrong about Bitcoin. 

The founder and CEO of ARK Investment Management said Thursday that she and her team misjudged the uptake of the cryptocurrency—or at least the timing of it—by companies and governments. Her firm has invested heavily in Bitcoin and continues to bet on its eventual rise to meteoric heights.

“We tempered a few assumptions,” she told Bloomberg Radio on Thursday. “We thought that—led by Tesla, Block (formerly Square), and MicroStrategy—more corporations would put Bitcoin on their balance sheets. We’ve dialed that one down considerably. And the same thing with nation-states.”

Bitcoin lost nearly 65% of its value over 2022, ending the year at about $16,500. It currently stands at just over $23,500. 

Companies holding Bitcoin, not surprisingly, took a beating last year. Tesla for example said in a regulatory filing this week that it registered a $204 million impairment loss on its Bitcoin holdings in 2022. As the cryptocurrency plunged, it sold 75% of its holdings last year.

Meanwhile few governments were eager to follow the lead of El Salvador, which in 2021 became the first country to adopt Bitcoin as legal tender. A Bloomberg article in November last year carried the headline, “El Salvador’s $300 Million Bitcoin ‘Revolution’ Is Failing Miserably.”

“Other countries will probably not move as quickly as they might have if El Salvador had had a grand swoosh right off the bat,” said Wood. “We do think it will happen, it’s just we’ve pushed it out a bit.”

As for why it will happen, she noted the inflation and fiscal crises people have suffered due to governments’ monetary responses to the pandemic. “Well, where do these people go for an insurance policy against an implosion in their purchasing power and wealth? It is in something like Bitcoin. Bitcoin is an insurance policy,” she said.

Bitcoin ‘could pass $1 million’

Wood acknowledged that 2022 was a “terrible year for everything crypto.” But she said it was “the centralized, opaque players” like crypto exchange FTX that went bankrupt. Bitcoin, by contrast, “is a rules-based digital monetary system, and it’s global, and there’s no human intervention,” she added.

FTX founder Sam Bankman-Fried didn’t like Bitcoin because “it’s transparent and decentralized. He couldn’t control it,” Wood said in December. 

Wood is sticking to her prediction that Bitcoin will see a rapid rise in value in the coming years. In five years, she said, it will hit “roughly $670,000, something like that, and then by 2030, as we see more use cases and more of these insurance policies taken out against fiscal and policy regimes that are not healthy, we think it could pass $1 million.”

Plenty of doubters have questioned her prediction. As Bloomberg host Carol Massar noted to Wood, “People are saying to me, ‘Really? Does she really stick to this?’”

Mark Mobius, the billionaire cofounder of Mobius Capital Partners, predicted in December that Bitcoin would fall to $10,000 at some point this year.

And this week, Warren Buffett’s right-hand man Charlie Munger argued in a Wall Street Journal op-ed that a “cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house.”

Munger, who once called Bitcoin “rat poison,” said the U.S. should follow China’s lead and pass laws that prevent both crypto trading and the formation of new cryptocurrencies.