A prominent investor is standing by her bold prediction that bitcoin will reach $US1 million by 2030, despite the deepening fallout from the FTX collapse.
Cathie Wood, founder and chief executive of Ark Invest, made the bullish prediction in April this year, when the largest cryptocurrency was trading at around $US41,000 — well below its peak only a few months earlier.
It’s been a nightmare year for crypto investors since then, with bitcoin losing more than half of its value after a series of high-profile implosions including the Terra/Luna coins, hedge fund Three Arrows Capital and lender Celsius.
The stunning collapse earlier this month of FTX — one of the largest crypto exchanges — may have the biggest contagion effect yet, given the Bahamas-based firm’s sprawling web of affected creditors.
But Ms Wood, a major investor in US-listed crypo exchange Coinbase, told Bloomberg on Wednesday she was standing by her call of $US1 million per bitcoin.
That would be a more than 6000 per cent increase from its current price of around $US16,200.
“Yes — you know, sometimes you need to battle test, you need to go through crises to see the survivors first of all but really to battle test the infrastructure and the thesis,” she said.
“And again we think bitcoin is coming out of this smelling like a rose.”
She conceded the latest market turmoil may have the effect of scaring off institutional investors for a time.
“Once they actually do the homework and see what’s happened here I think they might be more comfortable moving into bitcoin and perhaps ether as a first stop because they’ll understand it more,” she said.
Ms Wood insisted the underlying blockchain technology was solid.
“If you look at the bitcoin blockchain and ethereum, what you’ll find is the infrastructure, the technology, has not skipped a beat throughout this entire crisis,” she said.
“In fact bitcoin’s hash rate is at an all-time high, and that is a real indication of the security of the network. On ethereum we’re seeing the total value staked at $US24 billion, that is at an all-time high. So the infrastructure is working beautifully.”
She argued the collapse of FTX was “fraud” but nothing on the scale of Lehman Brothers or even Bernie Madoff.
“Put a little perspective into the situation here — the entire crypto asset ecosystem is an $US800 billion ecosystem. Apple is three times larger in terms of market cap,” she said.
“Many people are saying, is this another Lehman, could we see a domino effect here? The banking system back in 2008-09 [was] trillions and trillions of dollars. Right now it seems FTX [owes] $US5-10 billion to creditors. Lehman was $US1.2 trillion in claims. Madoff was $US64 billion in claims.”
Over the weekend, administrators for FTX revealed in court filings that the company owed an eye-watering $US3.1 billion to its top 50 creditors.
An estimated one million customers and other investors are facing total losses in the billions, including more than 29,000 Australian users who have lost “very significant” sums.
Three in four lost money
It comes after a study published last week found roughly three-quarters of people who have bought bitcoin had lost money.
Economists at the Bank of International Settlements, an institution widely considered as the central banks of central banks, analysed data on investors in cryptocurrencies in 95 countries between 2015 and 2022.
“Overall, back of the envelope calculations suggest that around three-quarters of users have lost money on their bitcoin investments,” they said in their study.
During the period studied, the price of bitcoin rose from $US250 in August 2015 to peak at nearly $US69,000 in November 2021.
The number of people using smartphone apps allowing one to purchase and sell cryptocurrencies rose from 119,000 to 32.5 million during the same period.
“Our analysis has shown that, around the world, bitcoin price increases have been tied to greater entry by retail investors,” the researchers wrote.
Moreover, they said they found that “as prices were rising and smaller users were buying bitcoin, the largest holders (the so-called ‘whales’ or ‘humpbacks’) were selling — making a return at the smaller users’ expense”.
The researchers did not have direct data on the gains or losses of individual investors.
However, they were able to extrapolate based on the price of bitcoin when new investors began using cryptocurrency trading apps and the approximately $US20,000 it was worth last month.
The study also found that the biggest segment of new cryptocurrency investors, at roughly 40 per cent, were men under 35, and who are commonly identified as the most “risk-seeking” segment of the population.
Researchers found most cryptocurrency investors saw it as a speculative investment and that young men tended to be more active in trading in the months after a big rise in the bitcoin price.
They said the jump in investors after price increases should raise concerns whether more consumer protection is needed.