ARK Invest CEO Cathie Wood defended her case for Bitcoin reaching $1.25 million in five years, arguing that institutional allocation, digital gold substitution and Bitcoin’s hard-coded scarcity remain the main pillars of the forecast.

On Fox Business In Depth: The Crypto Campaign May 26, Wood he said ARK’s $1.25 million forecast represents the company’s bull case, not a base case. She says the base case is “closer to $750,000.” But she described the more aggressive goal as the product of several overlapping changes: younger investors treating Bitcoin as a digital store of value, users in emerging markets seeking protection from monetary instability, and asset allocators starting to treat cryptocurrencies as a distinct investment category.

“The biggest reason is institutional adoption,” Wood said. “It’s a new asset class. It has a very low correlation to other asset classes in terms of risk and return. So it’s incumbent upon any asset allocator to explore it because it will increase risk-adjusted returns over time.”

Why Bitcoin Could Reach $1.25 Million in Five Years

This allocation argument has long been at the heart of ARK’s thesis for Bitcoin. In Wood’s approach, the role of Bitcoin is not constrained to speculative profits. She described it as a potential substitute for gold as generational wealth changes hands and younger investors are more willing to adopt a “digital store of value.” She also called Bitcoin an “insurance policy,” especially in emerging markets facing what she called “fiscal and monetary neglect at best or corruption at worst.”

Wood also tied Bitcoin’s potential growth to the burgeoning stablecoin market, though not in the way some crypto maximalists might expect. Rather than predicting an immediate movement of the dollar, she argued that stablecoins could strengthen dollar distribution around the world because major dollar-backed tokens are largely backed by U.S. Treasuries.

“With stablecoins, the dollar will also be strong,” Wood said. “So the stablecoins, which are USDC, the Circle stablecoin, and USDT, the Tether stablecoin, are mainly backed by US Treasuries. So to the extent that they are successful around the world, we will be effectively exporting dollars. And that should be positive for the dollar.”

At the same time, Wood stated that she sees a shift in asset allocation starting towards Bitcoin and other crypto assets, again citing their low correlation with conventional markets.

Another critical element of the discussion was regulations. Wood said the GENIUS Act and potentially the CLARITY Act could establish a framework that would allow institutions to more aggressively enter the cryptocurrency market. She noted that the administration wants the CLARITY project to be completed by July 4, although she said she was unsure if that deadline would be met.

“I think when we do this, because the odds of it being passed have increased recently, we will see a lot more institutional noise in the space,” Wood said.

The ARK founder also relied on the supply mechanics of Bitcoin as opposed to gold. She noted that about 20 million Bitcoins have already been mined from the 21 million supply limit, leaving only about 1 million to be issued. By comparison, gold supply is growing by about 1% annually, she said, and may augment further in response to the recent price augment.

“Bitcoin is measured mathematically,” Wood said. “There will be no supply response. It’s just measured mathematically. And right now it’s rising at about 0.9% a year, which is less than the long-term price of gold. And in the next two years we’ll be down to 0.45% a year.”

Wood acknowledged the debate about Bitcoin’s performance relative to gold during periods of macroeconomic stress, with gold sometimes rising in value while Bitcoin was oversold. However, she argued that the relationship between the two assets remains faint over longer periods, citing a correlation of 0.14 since 2019, when institutions started taking Bitcoin more seriously as an asset class.

She also said that gold has tended to lead Bitcoin in recent cycles and argued that the two currencies may now be changing places as Bitcoin gains momentum while gold weakens. She believes a stronger dollar could become a delicate headwind for gold while Bitcoin’s institutional adoption story continues to unfold separately.

At the time of publication, the BTC price was $75,034.

Featured image created with DALL.E, chart from TradingView.com