The bitcoin price, which began the year at around $7,000 per bitcoin token, has been on a roller coaster through 2020, crashing to under $4,000 in March before rebounding to well over $10,000.
With a raft of established investors turning to bitcoin this year as a potential hedge against the inflation they see coming as a result of unprecedented government spending and money-printing, a prominent investor in electric car-maker Tesla TSLA -2.5% has said it expects bitcoin's total value to balloon to between $1 trillion and $5 trillion during the next five to ten years.
"Bitcoin offers one of the most compelling risk-reward profiles among assets, as our analysis suggests it should scale from roughly $200 billion today to $1-5 trillion network capitalization during the next five to ten years," Ark Investment Management analyst, Yassine Elmandjra, wrote in a report out last month, adding that investors shouldn't ignore bitcoin as an asset class.
Ark is best known for its wildly optimistic price target for Tesla—a bet that has somewhat paid off this year as the Tesla price increased fourfold.
Bitcoin was by far the best performing asset of the last decade, with its price increasing from almost zero to highs of around $20,000 per bitcoin token in late 2017 before falling back somewhat. But, despite this massive run, Ark remains very bullish on bitcoin.
"Our analysis suggests bitcoin is early on its path to monetization, with substantial appreciation potential," Elmandjra wrote. "In our view, bitcoin’s $200 billion market capitalization—or network value—will scale more than an order of magnitude to the trillions during the next decade."
However, Elmandjra also cautioned over a number of "risks" that could derail bitcoin's run. Tricky technological problems with holding large amounts of bitcoin, an uncertain regulatory future, and what Elmandjra describes as "over-institutionalization"—which could result in "a few trusted parties dominating transactions" and destroying bitcoin's value proposition—are all hurdles that need to be overcome.
Ark has been bullish on bitcoin for some time, first buying shares in the Grayscale Bitcoin Trust (GBTC) in 2015 before cashing out its stake in 2018 in what was described as a "complicated decision" driven more by regulatory and tax-related concerns than by the "merits" of bitcoin itself. Ark does, however, still hold some GBTC shares via its exchange-traded fund, ARKW, as well as some of its other products.
Published in: Forbes