Ark Invest Has Big Ideas for Crypto

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Last Tuesday, Ark Invest released its annual Big Ideas report. Ark is an investment management firm that was founded by Cathie Wood in 2014, and specializes in disruptive technologies including cryptocurrencies. As such, its analysis focuses on picking the innovations that are set to displace existing standards, and Ark is adept at forecasting long-term tech trends.

A large portion of this year’s report was focused on blockchain and crypto, and in particular, three key areas stood out.

Bitcoin

The part of Ark’s publication that immediately attracted the most attention on social media was its bitcoin price prediction. According to the report’s forecasts, we could be looking at over $1.36 million per bitcoin in the year 2030.

It is a bold assertion, and the timing makes it even more relishable. After all, there were calls last year for a parabolic Q4 and a blow-off top somewhere above 100K, and up to 300K by the reckoning of the most exuberant modelers.

Those predictions did not come to pass, and we are still waiting to see if the bottom was in at around 30K after a no-holds-barred January sell-off. Which makes it all the more fun when a weighty report comes in with a confident $1 million price prediction.

Important factors noted by Ark include growing institutional investment, nation-states following El Salvador’s lead in making BTC legal tender, BTC as an appreciating asset class, and there is a breakdown of the currency/asset’s real-world use cases.

The latter list includes, among other things, use as a store of value, estimating that BTC could eventually have 50% of gold’s total market cap.

There is also a dismissal of environmental concerns, with a note that “bitcoin incentivizes new and more efficient forms of energy generation.” As alleged environmental damage is sometimes used as a platform from which to launch bad-faith attacks on crypto, it’ is good to see these claims addressed.

Ethereum

Ark’s analysis of Ethereum focuses on smart contracts and Ethereum’s role in facilitating a DeFi takeover which could, potentially, shift many financial functions away from traditional finance.

Although it is made clear that Layer 2 solutions are required to bring down transaction costs, a further conclusion the report proposes is that DeFi transactions might actually scale more effectively than traditional financial transactions and can enable real-time settlements around the world.

It is noted that Ethereum transactions do not need a financial intermediary and reduce counterparty risk, and DAOs are brought up as possible replacements for existing corporate structures.

This section of the report concludes with a spectacularly bullish prediction that ETH could surpass a market cap of $20 trillion by the end of 2030, which would equate to around $180,000 per unit of ETH.

Web3 and NFTs

The other section of note from a crypto perspective is focused on Web3. It emphasizes the key role that NFTs play in enabling digital asset ownership, and in moving digital ownership from corporations to individuals.

Emphasis has been placed on Ethereum’s role up to now as the primary platform for smart contracts and everything NFT-related, although mention is also given to Flow, Solana, Wax and to Ethereum sidechains. This is one area of analysis that seems lacking, as the alternative Layer 1 landscape is expansive and competitive and could ultimately lead to cross-chain interoperability.

While it is acknowledged that, up to now, 75% of Ethereum-based NFT sales have been art and collectibles, the report states that there will be a shift in the market as these are overtaken by NFTs used in gaming and metaverses.

It is suggested that NFTs will “blur the line between consumption and investment”, monetize gaming and entertainment, and that, in the process, web3 will significantly increase the monetization rate of online spending.

Ark predicts an increase in online expenditure from $1.4 trillion per year from now to $12.5 trillion per year in 2030 while offline consumption declines in parallel.

Crypto Has Long-Term Momentum

Do these speculations start to seem plausible, and so organizations such as Ark proceed to go all in, or do organizations such as Ark go all in, and so the speculations become plausible?

I would suggest it is initially the former, which then sets in motion a feedback loop, with adoption creating further speculation, and speculation hastening further adoption.

Just this week, Russia has indicated its interest in bitcoin mining, with Vladimir Putin saying the country has “competitive advantages”, and there is also no shortage of guesswork going on about which country will be the next to follow El Salvador in adopting bitcoin as legal tender, with Tonga, Turkey and somewhere in Latin America emerging as favorites.

There is talk of game theory and domino effects, and many of the optimistic future predictions for crypto come across as simultaneously revolutionary and realistic.

We didn’t get our blow-off top at the end of 2021, breaking the correlation with 2017, and whatever happens this year on the markets, January 2022 has felt far removed from Q1 of 2018 when a deep crypto winter was approaching.

Maybe the cold weather is waiting around the corner, but even if snow were to fall, bears and bulls will come and go, while crypto’s overall momentum is on a decade-long scale.

Last Tuesday, Ark Invest released its annual Big Ideas report. Ark is an investment management firm that was founded by Cathie Wood in 2014, and specializes in disruptive technologies including cryptocurrencies. As such, its analysis focuses on picking the innovations that are set to displace existing standards, and Ark is adept at forecasting long-term tech trends.

A large portion of this year’s report was focused on blockchain and crypto, and in particular, three key areas stood out.

Bitcoin

The part of Ark’s publication that immediately attracted the most attention on social media was its bitcoin price prediction. According to the report’s forecasts, we could be looking at over $1.36 million per bitcoin in the year 2030.

It is a bold assertion, and the timing makes it even more relishable. After all, there were calls last year for a parabolic Q4 and a blow-off top somewhere above 100K, and up to 300K by the reckoning of the most exuberant modelers.

Those predictions did not come to pass, and we are still waiting to see if the bottom was in at around 30K after a no-holds-barred January sell-off. Which makes it all the more fun when a weighty report comes in with a confident $1 million price prediction.

Important factors noted by Ark include growing institutional investment, nation-states following El Salvador’s lead in making BTC legal tender, BTC as an appreciating asset class, and there is a breakdown of the currency/asset’s real-world use cases.

The latter list includes, among other things, use as a store of value, estimating that BTC could eventually have 50% of gold’s total market cap.

There is also a dismissal of environmental concerns, with a note that “bitcoin incentivizes new and more efficient forms of energy generation.” As alleged environmental damage is sometimes used as a platform from which to launch bad-faith attacks on crypto, it’ is good to see these claims addressed.

Ethereum

Ark’s analysis of Ethereum focuses on smart contracts and Ethereum’s role in facilitating a DeFi takeover which could, potentially, shift many financial functions away from traditional finance.

Although it is made clear that Layer 2 solutions are required to bring down transaction costs, a further conclusion the report proposes is that DeFi transactions might actually scale more effectively than traditional financial transactions and can enable real-time settlements around the world.

It is noted that Ethereum transactions do not need a financial intermediary and reduce counterparty risk, and DAOs are brought up as possible replacements for existing corporate structures.

This section of the report concludes with a spectacularly bullish prediction that ETH could surpass a market cap of $20 trillion by the end of 2030, which would equate to around $180,000 per unit of ETH.

Web3 and NFTs

The other section of note from a crypto perspective is focused on Web3. It emphasizes the key role that NFTs play in enabling digital asset ownership, and in moving digital ownership from corporations to individuals.

Emphasis has been placed on Ethereum’s role up to now as the primary platform for smart contracts and everything NFT-related, although mention is also given to Flow, Solana, Wax and to Ethereum sidechains. This is one area of analysis that seems lacking, as the alternative Layer 1 landscape is expansive and competitive and could ultimately lead to cross-chain interoperability.

While it is acknowledged that, up to now, 75% of Ethereum-based NFT sales have been art and collectibles, the report states that there will be a shift in the market as these are overtaken by NFTs used in gaming and metaverses.

It is suggested that NFTs will “blur the line between consumption and investment”, monetize gaming and entertainment, and that, in the process, web3 will significantly increase the monetization rate of online spending.

Ark predicts an increase in online expenditure from $1.4 trillion per year from now to $12.5 trillion per year in 2030 while offline consumption declines in parallel.

Crypto Has Long-Term Momentum

Do these speculations start to seem plausible, and so organizations such as Ark proceed to go all in, or do organizations such as Ark go all in, and so the speculations become plausible?

I would suggest it is initially the former, which then sets in motion a feedback loop, with adoption creating further speculation, and speculation hastening further adoption.

Just this week, Russia has indicated its interest in bitcoin mining, with Vladimir Putin saying the country has “competitive advantages”, and there is also no shortage of guesswork going on about which country will be the next to follow El Salvador in adopting bitcoin as legal tender, with Tonga, Turkey and somewhere in Latin America emerging as favorites.

There is talk of game theory and domino effects, and many of the optimistic future predictions for crypto come across as simultaneously revolutionary and realistic.

We didn’t get our blow-off top at the end of 2021, breaking the correlation with 2017, and whatever happens this year on the markets, January 2022 has felt far removed from Q1 of 2018 when a deep crypto winter was approaching.

Maybe the cold weather is waiting around the corner, but even if snow were to fall, bears and bulls will come and go, while crypto’s overall momentum is on a decade-long scale.

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