A question with long intoxicated bitcoin observers is how to appreciate it. Lately, the answer to its value has been no matter what influential people like Elon Musk and star stock voter Cathie Wood say it is.
The original crypto asset bounced back this month when influencers weighed in. Bitcoin shot to a record high after Tesla revealed that the electric car company had converted $ 1.5 billion of its cash holdings in it. Then bitcoin is sucked into a downdraft when Tesla chief Musk suggested prices “Looks high.” Prices have fallen again after Wood, the investing rock star and founder of ARK Investment Management, told Bloomberg that she is ‘very positive’ about bitcoin and continues to see a price correction.
Wood’s interview came after Square said it bought $ 170 million in bitcoin this month, reporting that about half of its revenue came from bitcoin last quarter. The payment company earlier remarked founder Jack Dorsey in an interview with Quartz that crypto-asset has the potential to become the original currency of the internet. ARK has major interests in Tesla, Square and bitcoin in the funds it manages.
The difficulty of valuing bitcoin is in some ways a strong point when it comes to speculation. The original crypto asset does not generate cash flow, an important measure to determine the value of a company. It is not linked to a government whose currency will usually fluctuate based on interest rates, economic growth and inflation. Bitcoin did not get a means of payment, but it has been an extraordinary speculative object during its decades, and there is a case that the price of bitcoin has fallen on the trajectory of its sensational story. . As Nobel laureate Robert Shiller told Quartz during an earlier bitcoin boom in 2017, “big things happen when someone invents the right story and makes it known.”
Wood, whose flagship fund has risen more than 140% in the past year, is few of the bitcoin pessimists and says ARK sees many uses for it. The offer of the crypto asset has been fixed, unlike fiat currencies, and she told Bloomberg that bitcoin is an even better stronghold against inflation than gold. She pointed out that it is also resistant to confiscation, as bitcoin is decentralized and transactions take place outside the banking system. “Often we are called gold, we believe that bitcoin not only shares many of the properties of gold, but also improves it,” ARK analyst Yassine Elmandjra wrote in June.
Much may therefore depend on whether bitcoin, created in 2009, can earn the reputation for value protection that gold has developed through millennia. On Square’s Cash App alone, more than 3 million customers bought or sold bitcoin last year; in January, more than 1 million of them bought bitcoin for the first time. Tesla, Square, and MicroStrategy committed part of their companies’ cash holdings in bitcoin. But other CFOs may not think it’s such a smart idea. Naresh Aggarwal of the Association of Corporate Treasurers in London told DealBook that it’s more like ‘putting money on a horse race’ than being careful with cash reserves.