Bitcoin Will Join Balanced Portfolio with Stocks and Bonds: Ark Invest CEO

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In Brief
  • Ark Invest’s Cathie Wood believes cryptocurrencies could stabilize and eventually behave like bonds.

  • A traditional 60-40 portfolio may look more like 60% equities, 20% bonds, 20% cryptocurrency, says Wood.

  • Wood’s profile rose last year with her flagship Ark Innovation ETF, which has a large position in Tesla.

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Ark Invest CEO Cathie Wood told CNBC’s “Closing Bell” that she believes bitcoin (BTC) and other cryptocurrencies may become a standard part of recommended portfolios for investors.

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Being notorious for its high volatility, investors often associate bitcoin and other cryptocurrencies with assets that are higher risk.

However, Wood feels that BTC will eventually stabilize and become part of the recommended portfolio for average investors. Typically these portfolios have consisted of 60% stocks and 40% fixed income, or bonds. She believes volatile cryptocurrencies will eventually resemble bonds. 

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“We think as [cryptocurrency] becomes a better accepted new asset class… We do think it will behave, actually, I would say more like the fixed income markets, believe it or not,” Wood said.

Bitcoin Over Bonds

“If you think about bonds from this level, this idea of a 60-40 balanced portfolio is a bit problematic,” Wood stated. “We’ve been through a 40-year bull market in bonds. We would not be surprised to see this new asset class become a part of those percentages. Maybe 60 equity, 20, 20.”

Currently, bitcoin’s price is most correlated with real estate prices, Wood noted.

She had earlier elaborated on these thoughts at a digital conference hosted by Bloomberg. There she had said that BTC should be considered a new asset class and that it might one day even serve as a reserve currency. She also said there that BTC could replace bonds;

“You think about the traditional 60/40 stock-bond portfolio, but look what’s happening to bonds right now. If we are ending a 40-year secular decline in interest rates, that asset class has done its thing. What’s next? We think crypto could be the solution.”

Ark Innovation

Cathie Wood is the founder, CEO, and CIO of Ark Innovation, a family of exchange-traded funds (ETFs) based on disruptive technologies. Her profile rose dramatically last year thanks to the strong performance of her flagship Ark Innovation ETF.

One of Ark’s largest positions has been Tesla. Last month, Tesla made a massive $1.5 billion acquisition of BTC, which has helped drive its current bull run.

The Ark Innovation ETF has taken a hit in the opening months of 2021. However, Wood said that she is still confident in her strategy and in Tesla despite the recent losses.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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