Bitcoin and other cryptocurrencies could eventually become part of the recommended portfolio for ordinary investors, said Cathie Wood of Ark Invest on Monday.
Wood, whose star as an investor grew dramatically last year thanks to the strong performance of his flagship Ark Innovation ETF, said in CNBC’s “Closing Bell” that he believes volatile cryptocurrencies will end up looking like bonds.
“We think it will become a new, more accepted asset class … We think it will behave, in fact, I would say more like the fixed income markets, believe it or not,” said Wood.
Bitcoin had a dramatic run for new highs after being traded for less than $ 10,000 per currency in September. The asset rose to nearly $ 58,000 on February 21, according to Coin Metrics, before it cooled off a bit. It was trading at around $ 51,700 on Monday.
Although often called “digital gold”, bitcoin is not traded in conjunction with precious metals and its high level of volatility is more reminiscent of assets considered to be high risk. Wood said that, at the moment, the price of bitcoin was more related to real estate prices.
Still, Wood said he believed that bitcoin could stabilize over time and become part of the recommended portfolio for the average investor, which is 60% in stocks and 40% in fixed income, especially due to the high price of the bonds relative to the historic.
“If you think about bonds of that level, this idea of a balanced portfolio of 60-40 is a little problematic,” said Wood. “We have already experienced a 40-year bull market in bonds. We would not be surprised if this new asset class became part of those percentages. Perhaps 60 stocks, 20, 20,” said Wood.
Tesla, which has long been one of Ark’s biggest positions, converted part of its balance sheet cash into bitcoin earlier this year. Other companies have also increasingly adopted cryptocurrency, either by supporting payments and transfers, or by buying assets.
The main Ark fund plummeted in the early months of 2021, with the turnover in value detracting from some of Wood’s biggest stakes. The investor said on Monday that she is still confident in her strategy and in Tesla, despite recent losses.