Bitcoin, Ethereum and other cryptocurrencies have all been swinging wildly this week – rebounding after a closely watched Bitcoin upgrade.
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Bitcoin price surged back around $60,000 per bitcoin after collapsing around $55,000 earlier this week. Meanwhile, Ethereum, the second largest cryptocurrency by value, surged towards all-time highs.
Now, as traders and investors watch the news about who will be the next chair of the US Federal Reserve, Ark Investment Management CEO Cathy Wood has renewed her massive forecast for bitcoin prices – but warned of the growing possibility of a rate hike by the Federal Reserve.
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“There was a lot of fear,” Wood said this week on a call with Barron’s Financial Magazine. “It was partly caused by the correction in May. There was a jitter associated with the end of quantitative easing and then the rally at the end.”
The price of bitcoin collapsed in May this year after a huge rally, with the crash being largely attributed to the latest crackdown on bitcoin and cryptocurrencies in China. The price of Bitcoin lost about 50% of its value in a matter of weeks in May, but it has since returned to an all-time high of nearly $70,000.
This week, JPMorgan analysts teetered on their expectations of when the Fed would act to curb inflation, as it now lays out their forecast for a rate hike in September next year, with an introduction from 2023. JPMorgan now expects the Fed to raise rates by 2 percent. 0.25% from the third quarter of next year and continue to increase it by 25 basis points each quarter “at least until real rates reach zero,” it said. Reuters.
Wood, who has made a name for herself with big bets on bitcoin and Elon Musk’s Tesla electric car company, said.
“You will certainly have corrections if the cryptocurrency market continues to expand exponentially as it has recently, then those fears will dominate the market from time to time because people are simply making profits because the profits have been massive in the past year.”
However, despite raising concerns about short-term price volatility, Wood remains bullish on both Bitcoin and Ethereum.
“The reason we used the $500,000 mark for the bitcoin price target is that if institutional investors move into bitcoin and allocate 5% of their portfolios to it, our estimate is that bitcoin will rise by $500,000,” Wood said. “We can tell that this is happening by looking at on-chain analytics,” he said, referring to bitcoin transactions that are visible to anyone via the public blockchain.
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“We can see who is relocating and it seems that strong business owners are relocating [to bitcoin]“Why are they moving?” she asked. Because the correlation of returns between cryptocurrencies, especially bitcoin, and other assets – stocks, bonds, currencies, commodities – is very low. Studies tell us that if there is a low correlation between returns between assets, [buying] This asset, with a lower correlation, will raise the returns and reduce the risks over time.”
Wood named a report from Cambridge Associates from 2019 that advised institutional investors to consider bitcoin and cryptocurrencies.
“What we didn’t expect when we did our own study on bitcoin, we didn’t expect institutions, especially companies, to start diversifying their balance sheet funds into bitcoin,” Wood said. Tesla, run by Elon Musk and bitcoin, popularized the idea that companies could add bitcoin to their balance sheet, following in the footsteps of business software company Microstrategy.
“[Company, corporate and institution interest] It will be another source of demand in the future, especially if the Financial Accounting Standards Board changes accounting rules and shifts away from treating bitcoin as an intangible asset,” Wood said.
Wood said she, too, remains bullish about ethereum’s prospects, after the price of ethereum has jumped over the past year amid increased interest in blockchain-based decentralized finance (DeFi) and non-fungible tokens (NFTs) — both built largely on top of the Ethereum network.
“We have become equally optimistic [ethereum]Wood said. We see DeFi and NFTs take off on the Ethereum network. “