Bitcoin and other cryptocurrencies could eventually become part of the recommended portfolio for everyday investors, Ark Invest’s Cathie Wood said Monday.
Wood, whose star as an investor rose dramatically last year thanks to the strong performance of its flagship Ark Innovation ETF, said on CNBC’s “Closing Bell” that she believes volatile cryptocurrencies will eventually resemble bonds.
“We think if it becomes a more accepted new asset class … We think it will actually behave, I would say more like the fixed income markets, believe it or not,” Wood said.
Bitcoin has seen a dramatic flight to new highs after trading below $ 10,000 a coin in September. The asset rose to nearly $ 58,000 on Feb. 21, according to Coin Metrics, before cooling off somewhat. It traded at around $ 51,700 on Monday.
While bitcoin is often referred to as ‘digital gold’, it does not trade with precious metals and its high volatility is more reminiscent of assets considered higher risk. Wood said bitcoin price was most correlated with real estate prices at this point.
Still, Wood said she thinks 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 given the high price. of bonds versus history.
“When you think of bonds at this level, this idea of a 60-40 balanced portfolio is a bit problematic,” Wood said. “We’ve been through a 40-year bull market in bonds. We wouldn’t be surprised if this new asset class becomes part of those percentages. Maybe 60 stocks, 20, 20,” Wood said.
Tesla, which has long been one of Ark’s largest holdings, converted some of its cash on its balance sheet into bitcoin earlier this year. Other companies have also increasingly adopted cryptocurrency, either by supporting payments and wire transfers or by actually buying the assets.
The flagship Ark fund has fallen in the early months of 2021, with the rotation in value hurting some of Wood’s biggest interests. The investor said on Monday that despite the recent losses, she still has confidence in its strategy and Tesla.