Cathie Wood, the founder and CEO of Ark Invest, didn’t foresee the entry of strong institutional holders into the cryptocurrency market when her investment management firm first began studying Bitcoin (CRYPTO: BTC).
What Happened: In a recent interview with Barron’s, Wood said that large institutional players have been moving into Bitcoin because of its low correlation with other traditional asset classes.
“We can see who’s moving in and it looks like strong, institutional holders are moving in [to Bitcoin]. Why are they moving in? Because the correlation of returns among crypto, especially Bitcoin, and other assets – stocks, bonds, currencies, commodities – are very low,” she said.
Recent data shows that Bitcoin’s 30-day correlation to the Nasdaq 100, which tracks the 100 largest tech stocks by market cap, fell to a 21-month low of 0.0075.
While Wood attributes Bitcoin’s lack of correlation with other assets as one of the key reasons behind institutional interest, she admitted to being caught by surprise when companies like Tesla Inc (NASDAQ:TSLA) opted to add BTC to their balance sheets.
“What we didn’t expect when we did our own study on Bitcoin, we didn’t expect institutions, mainly corporations, to begin diversifying their cash on the balance sheet into Bitcoin,” explained Wood.
“The reason we’ve used the $500,000 mark for a Bitcoin price target is that if institutional investors move into Bitcoin and allocate 5% of their portfolios to it, by our estimates Bitcoin will go up by $500,000. We can tell this is happening by looking at on-chain analytics,” she added.
Price Action: Bitcoin is trading at $57,915, down 2.32% in the last 24 hours.
Photo by Aleksi Räisä on Unsplash.