Cathie Wood, the CEO of Ark Invest (a hedge fund), reiterated her forecast that Bitcoin will hit $1 million by 2030 in a Bloomberg interview on Tuesday. She thinks heThe underlying blockchain technology will give Bitcoin the necessary edge to prevail in the future. How sensible is your stance?
Generally speaking, it could be said that Cathie Wood’s predictions are not entirely unreasonable. In most cases, they are the result of a lot of research. However, you have to be very careful with her inveterate optimism. Despite his good arguments, his forecasts have not always been correct in the short term. For example, Cathie Wood has always been a bull of the tech sector. And when I say “always” it is “always”. Bullish in 2020. Bullish in 2021. And bullish in 2022. So, thanks to that incurable bull of hers, her fund has lost a lot of money lately from overpriced buying.
Of course, fund managers are a lot like politicians when it comes to admitting error. In other words, they never admit a mistake. What they usually do is use linguistic tricks to turn the tables. If the market goes up like foam, they present themselves as geniuses. On the other hand, if the forecasts do not come true and the market falls, the strategy is to play down the losses (realized or not) using the excuse of “long-term investment”.
They never admit to miscalculation or judgment. Which is very convenient for the prophet whose prophecy didn’t come true. It’s not my mistake. It is your lack of faith. The excuse “long-term investment” is a mechanism that blames the victim, pointing out her impatience and indiscipline. So, it’s not a matter of my forecasts failing and many clients investing under a false expectation. Now it’s a matter of patience. Y clients should accept losses with a smile and saying “I am a long-term investor”.
If we go back in time and go to the last quarter of last year, we will find a bullish Cathie Wood at those prices. The unsophisticated investor took Cathie’s forecasts and turned them into a promise. Consequently, they invested her savings trusting her wisdom. They bought at those prices with a bullish expectation. After all, the unsophisticated investor turns to the professional manager for expert management. Then the prices start to fall. And now?
Tesla, for example, has fallen by almost 55% since last December. What does Catherine say? Cathie tells us that we need to view Tesla as a long-term investment. In other words, periods of 3 years, 5 years or more. That’s very good. But she forgets to mention that investing for the long term does not imply that we should buy an overvalued asset at the wrong time. That is, it is not an excuse to buy expensive and late. It’s not about buying and waiting. Long-term investors should also buy at good prices.
High-buyers should wait longer for the recovery. They waste time. And time is gold. Buying Tesla shares last year is not the same as buying those same shares today. It is not the same to have bought BTC for $65K than to have bought BTC for $16K. Why? Because unrealized losses are also losses. While waiting, time and opportunity are wasted. In other words, “Investing for the long term” is not an excuse to buy at the wrong time and not take profits on time.
Now, there is a detail that we must take into account. LHedge funds and crypto exchanges need the capital of others to grow. So, it is not easy to resist the temptation to promise towns and castles. After all, pessimism doesn’t sell much. The baker is always looking to sell his bread. And you always have to speak well of the product you are selling.
Cathie Wood tells us about 2030. But 2030 is not 2023. 2030 is not next week. It’s not next month. In fact, Wood conceded that the FTX crash and this bear market could give institutional investors a reason to delay cryptocurrency adoption (in the short term). Here it is very important to make a distinction between the short-term forecast and the long-term forecast.. of courseWe can be optimistic in the long term and, at the same time, cautious in the short term without falling into contradiction.
Similarly, we can be long-term investors and, at the same time, be cautious about buying at this very moment. Sometimes it is better to hoard cash by waiting for a better time to come back than to drag out unrealized losses unnecessarily due to a misunderstanding of what it means to be a long-term investor.
This year has been fatal for Cathie Wood. What else can she say? Right now, she has no choice but to color, head held high, her enormous fall like a passing setback. A battle was lost, but we’ll win the war or something. Optimism.
Cathie Wood is one of those people who predicts deflation for the future. Y this “deflation”, according to her, will be possible due to technological advances. If the new technologies, in effect, manage to eliminate supply failures and increase the efficiency of the economy, it is certainly possible that we will find ourselves with a general fall in prices. LA big question: When will that be? 2023? 2024? 2030?
Will the deflationary pressures of technology be able to counteract the inflationary pressures of the deglobalization process and geopolitical tensions? That remains to be seen. But let’s hope so. The scenario planned by Cathie Wood is a scenario that would greatly benefit the price of Bitcoin. A deflationary framework is excellent for financial markets, because deflation is combated with injections of liquidity. And liquidity does wonders for markets.
Why is Ark’s Cathie Wood still investing in Bitcoin? Well, because Bitcoin promises. It is a movement like many mourners. This does not mean, however, that we should put caution aside in the short term. These are times of great uncertainty and volatility. Which implies that not every moment is good to buy. Or, put another way, buying the dip is not always a good idea. If the dip in question is the first of many to come, “buying the dip” is buying at the worst time.. Optimism cannot be blind.
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