Cathie Wood is the founder and chief investment officer of Ark Investment Management, which operates several exchange-traded funds focused on innovative technology stocks. Electric vehicles, e-commerce, space exploration, artificial intelligence (AI), and cryptocurrency are just some of the areas Ark is betting on right now.

Ark is very bullish on Bitcoin (BTC -0.47%), which is the world’s largest cryptocurrency by market capitalization. The firm’s official research suggests Bitcoin could soar 2,193% by 2030, but Wood herself came out with a new price target earlier this year which implies a whopping 5,789% upside instead.

Bullish sentiment appears to have returned to the cryptocurrency market, and Bitcoin is trading near a record high right now. But is Wood’s prediction realistic?

A unique asset with eye-popping returns to date

Bitcoin is a truly decentralized cryptocurrency because it isn’t governed by any one person or institution. It’s built on a blockchain, which is an accurate, transparent, and autonomous system of record. For those reasons, many crypto enthusiasts have often touted Bitcoin as a viable alternative to traditional money.

However, it’s incredibly volatile. Bitcoin is up over 17,000% in the last 10 years alone, obliterating the return of every other major asset class. But it has also plunged 70% from its all-time high on two occasions during that period:

Bitcoin Price Chart

Bitcoin Price data by YCharts

Volatility makes cash flow management almost impossible for any business accepting Bitcoin as a primary means of payment for goods and services, which is probably why only 9,331 merchants in the entire world are willing to do so (according to CryptWerk). If consumers can’t spend their Bitcoin at their favorite stores, they don’t have much incentive to own it.

Bitcoin investors, however, will cite Bitcoin’s favorable supply-and-demand dynamics as a reason for further upside. Supply is limited to 21 million coins, which are paid to miners who use powerful computers to add new blocks to the blockchain. A halving occurs with every 210,000 new blocks, which cuts the mining reward in half. According to most estimates, the last Bitcoin will be mined sometime around the year 2140.

Since supply is capped, any new source of demand will theoretically drive the price per Bitcoin higher. As of this writing, more than 46 million crypto wallets hold Bitcoins or partial Bitcoins, and that number is gradually trending higher. Plus, the approval of exchange-traded funds (ETFs) earlier this year by the Securities and Exchange Commission is creating new demand from institutional investors.

However, those factors alone probably won’t be enough for Bitcoin to reach Cathie Wood’s lofty price target.

Ark’s catalysts for a Bitcoin surge

Ark outlines eight potential reasons for further upside in Bitcoin in the coming years. Some are a little fanciful — for example, Ark thinks high-net-worth individuals will buy Bitcoin because it’s a seizure-resistant asset, but regulators have successfully confiscated significant amounts of the cryptocurrency in recent years, so that doesn’t hold much water in my opinion.

However, three of the eight catalysts stand out to me as viable drivers of potential upside:

  1. Emerging market currency: The decentralized nature of Bitcoin makes it an intriguing replacement for traditional money in countries with political and economic instability or corruption, because the blockchain can’t be manipulated by governments. El Salvador is running this experiment right now, so time will tell whether Bitcoin works in that setting.
  2. Institutional investment: Bitcoin ETFs provide financial advisors and institutions with a legitimate, regulated way to add the cryptocurrency to their portfolios. Buying an ETF is still a speculative bet on further upside, but having a broader investor base could be a positive catalyst for higher prices over the long term.
  3. Digital gold: Ark thinks between 20% and 50% of the money investors normally allocate to gold could flow into Bitcoin instead. Since it’s more portable than gold and has also significantly outperformed the yellow metal, that isn’t a crazy prediction.

Bitcoin is trading at $64,518 as of this writing, but Ark thinks the above catalysts could catapult it to $1.48 million per coin by 2030. That represents a potential return of 2,193%.

But Wood issued a fresh price target of $3.8 million when she was speaking at the Bitcoin Investor Day back in March, which implies a staggering potential upside of 5,789% from here.

Is Wood’s forecast realistic?

Wood cites the approval of Bitcoin ETFs as her main reason for the $3.8 million target. So far, more than 30 cryptocurrency funds have been approved by the SEC (including two managed by Ark), and they have a combined $61 billion in assets under management. She says if institutional investors allocated just 5% of their total assets under management to Bitcoin and Bitcoin ETFs, that alone would be enough to warrant a price of $3.8 million per coin.

There are a couple of problems with that prediction. First, Bitcoin ETF inflows have tapered off since earlier this year, which suggests demand from institutional investors is slowing. Second, Bitcoin would have a fully diluted market capitalization of $79.8 trillion if it reached a price of $3.8 million per coin, making it almost three times as valuable as the entire U.S. economy by gross domestic product.

Bitcoin would also be 23 times more valuable than Apple, which is the world’s largest company, and four times more valuable than all the above-ground gold reserves on Earth.

Therefore, a Bitcoin price of $3.8 million is extremely unlikely, in my opinion. Using Bitcoin as a store of value does make sense, but in that case, I think investors should be targeting the market cap of gold, which currently stands at $17.9 trillion. That would translate to a Bitcoin price of $852,380, which still represents a 13-fold gain from where it currently trades.