Bitcoin and other cryptocurrencies could eventually become part of the recommended portfolio for everyday investors, Cathie Wood of Ark Invest said Monday.
Wood, whose star as an investor rose dramatically last year due to the strong performance of its flagship Ark Innovation ETF, told CNBC’s “Closing Bell” that he believes volatile cryptocurrencies will eventually resemble bonds.
“We think that as a new asset class becomes more accepted … We think it will actually behave more like fixed income markets, believe it or not,” Wood said.
Bitcoin has had a dramatic run to new highs after trading below $ 10,000 a coin since September. Assets rose to nearly $ 58,000 on Feb. 21, according to Coin Metrics, before cooling slightly. On Monday, it traded at about $ 51,700.
Although often called “digital gold”, bitcoin does not trade in tandem with precious metals, and its high level of volatility is more reminiscent of assets that are considered to be a higher risk. Wood said that at this time, the price of bitcoin was most correlated with real estate prices.
However, Wood said he believes bitcoin can stabilize over time and become part of the recommended portfolio for the average investor, which is 60% in shares and 40% in fixed income, especially given the high price of obligations in relation to history.
“If you think about bonds at this level, this idea of a 60-40 balanced portfolio is a little problematic,” Wood said. “We’ve been through a 40-year bond market. We wouldn’t be surprised to see this new asset class become part of that percentage. Maybe 60 equity, 20, 20,” Wood said.
Tesla, which has long been one of Ark’s largest positions, converted some of its cash on its balance sheet to bitcoin earlier this year. Other companies have increasingly adopted cryptocurrencies, either by supporting payments and transfers or by buying assets.
Ark’s flagship fund collapsed in the first months of 2021, with value rotation affecting some of Wood’s largest holdings. The investor said on Monday that she is still confident in her strategy and in Tesla, despite recent losses.