Why Cathie Wood’s ARK Invest Modified Its $1.5M Target | CoinDesk Spotlight

Original Source: CoinDesk

• Moderator: Jennifer Sanasie
• Guest: Cathie Wood, Founder, CEO, and Chief Investment Officer of ARK Invest
• Broadcast time: 2025.8.15

Preface

In the digital asset and innovative financial sectors, market dynamics often exceed expectations. Cathie Wood expressed surprise at the rapid adoption of stablecoins and optimistically predicted that even with the most cautious adjustments, the potential over the next five years will far exceed expectations. As she outlined in her "Big Ideas 2025," investing in emerging markets and cutting-edge technologies is not only full of opportunities but also requires forward-thinking and keen insight. In this interview, we delve deeper into Cathie's investment philosophy, market observations, and how she seizes innovative opportunities in a turbulent financial environment.

1. Starting Out: Cathie’s Investment Journey

“We’ve been really surprised by the speed of adoption of stablecoins. If you were to adjust any of that $1.5 million forecast, you might see, and you can see in Big Ideas 2025 how we framed that optimistic scenario, we might have taken a little bit of that out of the emerging markets portion of the forecast. I think it’s pretty safe to say that in five years, our optimistic scenario is well over $1 million, well over $1 million.” — Cathie Wood

Jen: Cathy Wood, welcome to CoinDesk Spotlight.

Cathie Wood: Thank you, Jen, it's great to have you.

Jen: We're thrilled to have you here too. So let's start by looking back at when you first became interested in markets, financial systems, and the importance of innovation.

Cathie Wood: Oh my gosh…I actually had no idea what I wanted to do in college, so I tried just about everything: engineering, education, geology, astronomy, physics…it was all there.

Jen: You really explore all areas.

Cathie Wood: Yes, it's true. And honestly, the reason I didn't take economics classes was because my father had always wanted me to study economics, so I deliberately put it off until last. I didn't take my first economics class until my last semester of my sophomore year at UCLA, and I immediately fell in love with it. I also realized that UCLA wouldn't allow me to take many business courses because it only offered a graduate business school... So I transferred to USC, where I met Art Laffer.

That might be a bit much, but that's okay. Art Laffer was a renowned economist and the originator of the "Laffer Curve." Seeing my passion for economics, he introduced me to Capital Group, then the largest and perhaps the most prestigious investment firm in Los Angeles.

When I first arrived at the firm, I knew next to nothing about how the financial world worked. But there, I first experienced the intimate connection between economics and these exciting market dynamics. More importantly, I realized, "Wait, our jobs are all about continuous learning, and we get paid for it? Isn't that amazing? We can even use our understanding to deduce how the world works."

I started my career at Capital Group at the age of 20, and from that moment on, I knew I would be in this industry for life.

2. Meet Art Laffer and fall in love with economics

Jen: What sparked your passion for economics? You've tried almost every major before, and you even had a little bit of a disagreement with your father.

Cathie Wood: Yeah, a little bit. But we've always had a good relationship, and this "rebellion" was more of a normal teenage rebellion. What really drew me to economics was Art Laffer's captivating teaching style.

After I transferred to USC, he would start every class with a joke to get us into the classroom atmosphere, then put the day's topic into a real-world context and explain, "Why do we need to learn this?" By the end of the class, you'd find the blackboard already densely covered with formulas.

He always guided us in a vivid way, exposing us to different schools of economic thought: Harvard's Keynesianism and the Chicago School's monetarism. At USC, he promoted supply-side economics, which was even closer to the Austrian School. He wanted us to not only learn the theory but also understand the differences between these frameworks.

This multi-perspective training was crucial for my entry into the investment industry. In the late 1970s, almost everyone was a Keynesian; even monetarists were considered a minority. Later, I witnessed firsthand the shift in global economic thinking toward supply-side economics during the Reagan administration. My studies at USC were excellent preparation for the most spectacular bull market in history, the 1980s and 1990s.

However, when I first started working in New York, I was hesitant to discuss Laffer's views openly. A core assertion of supply-side economics—"When tax rates are too high, tax cuts actually increase revenue"—was difficult to convince against the backdrop of the early 1980s recession. The Federal Reserve had pushed interest rates above 15%, mortgage rates even exceeded 20%, and the economy was in a deep recession. It was only a few years later, in that environment, that I had the opportunity to express these views more openly.

III. On the Federal Reserve Interest Rate, Economic Outlook, Real Estate, and Innovation

Jen: Now that you've shared your experiences and how you've coped, I want to bring the conversation back to the present. As we were recording the show today, the Federal Reserve had just announced it would keep interest rates unchanged. I'm curious, what are your thoughts on the future trajectory of interest rates?

Cathie Wood: I found today's vote quite interesting, with two members dissenting. This hasn't happened since 1993, which I remember well because I was in the industry back then. It's symbolically significant, given that Chairman Powell always hoped for a unanimous vote, and this was a split vote.

Part of the reason might be that Powell's term ends next May, and perhaps these two members are "jumping" for that position? Who knows. Or perhaps it's because they've noticed something's changing. I haven't read all the minutes yet, but I've seen a clear pullback in the real estate market, with prices in many areas barely responding to the tariff hikes. Perhaps they're thinking, "Wait a minute! Perhaps the biggest surprise in the next six months will be a significant drop in inflation."

Recent employment data has been a bit mixed, with some indicators strong and some weak. However, I've noticed that unemployment among recent college graduates is rising, as many entry-level jobs are being automated, particularly by AI.

We have long believed that the US economy is currently in a "rotational recession." The Federal Reserve has raised interest rates 22 times in just over a year, crushing one sector after another, starting with real estate. By many measures, real estate is still 35% below its peak, and some indicators are falling sharply again.

I expect housing-related inflation to continue to decline. Various monthly data sources already show year-over-year declines, though with the exception of the median price of existing homes, a general decline has yet to materialize. However, if sellers truly want to sell their homes and interest rates remain unchanged, they will have no choice but to lower their prices. If they do, the biggest surprise in the second half of this year could be very low inflation.

It should be noted that there is a long lag period for falling housing prices to be transmitted into statistics and then "disappear" from the data, so this impact will last for some time.

We believe the US economy is on its way to a stronger-than-expected recovery from a "rotating recession" as uncertainties surrounding tariffs, taxes, government spending, and regulation gradually dissipate. This will be reflected in productivity gains over the next six to nine months. Despite slow overall economic growth, productivity growth has already exceeded 2% year-over-year, and I believe it will continue to rise. The technologies we're focusing on—robotics, energy storage, AI (especially important), blockchain, and multiplex sequencing—all have significant potential to boost productivity.

Most of these innovations are deflationary, with AI being the most prominent example. AI training costs are falling by 75% annually, while inference costs—the cost of entering a question into ChatGPT or Grok (I prefer Grok these days) and getting an answer—are falling by 85% to 98% annually (even 98% in China). These cost reductions are significantly driving usage growth.

Therefore, we believe this is "good deflation," unlike the "bad deflation" of 2008-2009. This is a boon for companies at the forefront of technology, but it puts pressure on companies facing disruption, forcing them to cut prices. We believe the world we're entering will be more deflationary than most economists and strategists anticipate.

4. How the New Regulatory Environment Promotes Innovation in Agentic AI and Blockchain

Jen: You mentioned the outlook for 6 to 9 months. What role will cryptocurrencies play in the strong recovery you envision?

Cathie Wood: The shift in the regulatory environment is crucial. We've just transitioned from a period of hostile regulation under SEC Chairman Gary Gensler to a more legislatively friendly environment. Regulation is now guided by a legal framework, rather than relying on "enforcement-style regulation" to stifle innovation. That approach previously forced many innovative projects to leave the United States and move to other countries.

The situation is rapidly improving, especially with David Sacks' appointment as head of both cryptography and AI. The concept of "Agentic AI" has also emerged. Agentic AI refers to AI agents capable of autonomously completing specific tasks, such as walking, working, and communicating. Of course, their capabilities have certain limits. Smart contracts are crucial for the efficient operation of these AIs, as these agents need to interact with websites. For example, purchasing content or services on CoinDesk requires automated smart contracts to execute the payment process. This is precisely where the integration of AI and blockchain technology comes in.

We have already seen similar revolutions in the financial services sector. After regulatory approval, more and more financial institutions have entered the blockchain field because they have found that they can significantly reduce costs.

I like to compare this situation to the early days of the internet in the late 1980s and early 1990s. Back then, few developers building the internet envisioned financial services or commerce moving online, so there was no native payment layer. Only today, thanks to blockchain, do we truly have this layer. For the past 30 to 40 years, due to the lack of a payment infrastructure, traditional finance has been forced to rely on numerous intermediaries to mitigate risk once credit cards were online. These intermediaries levied a 2% to 3.5% fee on every transaction, practically a "systemic tax."

Blockchain can reduce this "tax" from 3.5% to approximately 1% (in Nigeria, it can even be reduced from 20% to nearly 1%). We estimate that global financial services assets under management will reach $250 trillion in five years. If you can reduce costs by 2-2.5 percentage points in a market of this size, it would be a disruptive improvement in friction and efficiency.

Cost is only one aspect. In terms of productivity, Agentic AI + smart contracts + APIs will also have an equally profound impact on automated API transactions (including micro-transactions).

5. Ethereum, Agentic AI, and ARK’s Logic for Investing in Bitmine

Jen: You've previously invested in Tom Lee's Bitmine, and ARK currently holds one of the largest institutional reserves of Ethereum (ETH). Does this relate to the Agentic AI and smart contracts you mentioned earlier? Do you believe Ethereum will become the foundational layer supporting a world of efficient Agentic AI?

Cathie Wood: Yes. We've been closely observing which protocols institutions choose to integrate into their digital asset strategies. First, Coinbase chose Ethereum for its second-layer network, Base, and more recently, Robinhood built its second layer on Ethereum. We've long hypothesized that Ethereum would become an institutional-grade protocol. While Solana significantly outperformed Ethereum for a period of time, many questioned our judgment. However, based on voting (actual deployments), Ethereum, while having higher transaction costs and slower speeds, is more secure due to its greater decentralization. Solana is more likely to prevail in consumer-facing applications.

Investing in Bitmine was actually our first time gaining stable exposure to Ethereum through an ETF. Buying directly into other funds or ETFs presents numerous challenges, including tax implications (such as "bad income" clauses, which can result in loss of tax benefits or even forced closure if a particular category of gross profit exceeds 10% of the fund's annual profits) and accumulating fees. We couldn't afford such risks, so we couldn't find a suitable path. Bitmine offered a solution. Despite the premium, the Ethereum Treasury offered greater utility than the Bitcoin Treasury, including staking, which ETFs currently don't support.

Furthermore, as a cornerstone investor in Circle, we have been following the explosive growth of stablecoins, with the majority of stablecoin activity occurring on Ethereum. These factors combined give us even greater confidence in Ethereum's potential as a foundational layer for Agentic AI and explain our investment in Bitmine.

6. The Case of Bitcoin Breaking Through $1 Million

Jen: Does this change your view on Bitcoin? I know you predicted that Bitcoin would reach $1.5 million by 2030. Has this prediction changed?

Cathie Wood: If you ask me what the biggest surprise of the past decade has been, it's that we founded ARK in 2014 and published the first Bitcoin white paper in 2015. At the time, we believed Bitcoin would play the role of stablecoins in emerging markets. Tether's story was completely unexpected. Co-founder Paolo told me that they didn't realize until the pandemic that Tether would become a crucial way for emerging markets to gain exposure to the US dollar. Back then, children would tell their parents, "No need to go to the black market to exchange dollars today; we can do it online." That was the catalyst for its widespread adoption.

We didn't anticipate that stablecoins would replace Bitcoin's role in this space so quickly. Adjusting our $1.5 million forecast might slightly reduce the contribution from emerging markets. However, the greater driving forces remain twofold: first, Bitcoin is becoming the primary entry point for institutions into the digital asset market; second, Bitcoin is replacing gold as a store of value. These two principles remain unchanged, so we still believe Bitcoin will surpass $1 million within five years, and potentially even significantly exceed that figure.

7. Cathie’s Top 3 Crypto Assets and Crypto-Related Stocks

Jen: Let's talk about your focus beyond Bitcoin. With the constant innovation in the crypto asset space, it seems like your vision has expanded beyond Bitcoin, and you've even adjusted your price forecast for 2030. From your perspective, what are the most noteworthy blockchain protocols or projects right now?

Cathie Wood: We primarily invest in public markets, but we also have a responsibility to educate investors, much like CoinDesk, so we carefully guide clients into the crypto ecosystem. Currently, our core holdings are Bitcoin (BTC) and Ethereum (ETH). Within our private equity fund, we used to have a relatively heavy position in Solana (SOL), but recently, when Ethereum outperformed Solana, we adjusted our weighting.

These three (BTC, ETH, and SOL) are our current "top three." We are also focusing on Layer 2 networks. To educate investors, we will conduct a more in-depth analysis of these three assets, using familiar investment terms such as return-risk ratios, Sharpe ratios, and Sortino ratios. Related research papers are already in preparation.

Furthermore, we will follow the model of the Bitcoin Monthly report, potentially publishing bimonthly reports in alternating months. We will publish analysis on Ethereum, Solana, and other potential protocols, particularly through on-chain analytics to demonstrate their signaling characteristics. This level of transparency is not available in the stock or bond markets and is particularly valuable to institutional investors.

Jen: You just listed your top three crypto ecosystems. Do you have a similar top three list for publicly traded crypto companies?

Cathie Wood: Across our flagship ARKK fund, ARKF Fintech Fund, and ARKW Next Generation Internet Fund (covering crypto and AI), Coinbase, Circle, and Robinhood are all consistently in the top ten. While Robinhood isn't a pure-play crypto company, we repeatedly asked about their crypto investments in our quarterly communications three years ago. At that time, they were pulling back, and we briefly reduced our focus. But now, they're fully committed to crypto. If you've watched their Analyst Days or new product launches, you'll see they're focused on winning.

8. Why is MSTR not in the top three?

Jen: So, MicroStrategy isn't in your top three?

Cathie Wood: MicroStrategy is indeed a bet on Bitcoin, given that it's the largest asset in the sector. However, Coinbase is also heavily driven by Bitcoin's performance and offers broader coverage of the crypto market. Furthermore, while Bitmine isn't in the top ten, we believe its strategic position is also growing as Ethereum's popularity among institutions increases.

9. Will quantum computing threaten Bitcoin?

Jen: Cathie, I'd love to hear your thoughts, as you're known for your ability to bet on the future and make bold decisions based on trends and new technologies. We've discussed before how many people are currently considering their place in the future world. In the Bitcoin space, there's a theory that quantum computing could threaten Bitcoin's security. Since you're here today, I'd like to know if you believe quantum computing could pose a real threat to the Bitcoin ecosystem.

Cathie Wood: Of course, it's an issue we discuss frequently. In fact, we promoted our former Director of Research to Chief Futurist precisely because of the importance of these long-term, existential questions. He and our team, especially David Puell on the crypto team (whose name embodies many well-known on-chain analytics metrics), are deeply focused on this. Brett (Chief Futurist) and David have been evaluating the breakthroughs we've heard about in quantum computing. While there have been some advances, they're mostly incremental, far from a true technological leap. We believe that if quantum computing truly impacts Bitcoin, it likely won't happen until the late 2030s or even the 2040s.

One reason is that the current pace of AI development has far exceeded expectations, even exceeding our imagination even before we founded ARK. Many tasks once expected to be accomplished by quantum computing are now likely to be achieved by AI first. Furthermore, AI performance has not reached a so-called "ceiling"; on the contrary, the more computing power invested, the faster the performance increases. This means that much of the capital that might have previously flowed into quantum computing will continue to be concentrated in the AI field in the short term, and we are eager to see how far AI can go.

10. Threats from Innovation

Jen: You mentioned that the team repeatedly discusses these "existential questions" about the future when developing their investment thesis. Which ones keep you up at night?

Cathie Wood: Our biggest concern over the past few years has been the dire trajectory of US regulation. Over the past four years, we've even seriously considered turning more overseas for innovative ideas, particularly in the blockchain sector, because the US innovation landscape is being completely stifled. Blockchain is the next generation of the internet, and the rise of the previous generation allowed the US to lead the global technological revolution. If we miss this opportunity, the US risks handing over the next, even greater technological wave to others.

From an investment perspective, the rest of the world was even more fragmented. Going to Europe meant facing dual regulatory oversight from both the EU and its member states, along with the attendant geopolitical risks. Therefore, for us, this was a very real threat. I remember at the time, during a livestream or online seminar, I bluntly stated, "Chairman Gensler is a menace to innovation." Only then did I realize that, as an institution regulated by the SEC, this might lead to retaliatory actions against us. After all, there were indeed some retaliatory regulatory actions during that period. Nevertheless, we decided we had to speak out because it was not only about us, but also about the future of American tech companies as a whole, even if it meant taking risks.

Jen: Has the SEC contacted you about your remarks?

Cathie Wood: No, we haven't received any direct feedback. Of course, like all investment firms, we receive regular SEC scrutiny. In particular, we are very transparent about our practices. For example, we were the first firm to make our research freely available on social media, we publish our trading records daily, and we maintain a high level of transparency about our portfolio. Mutual funds don't do this because it increases the risk of SEC scrutiny. However, we've long known that we would be subject to frequent scrutiny, so we had to be thorough in our compliance efforts.

Our Chief Compliance Officer served as an SEC examiner for four years, and we consistently hold ourselves to that same standard. I'm not sure this gives the SEC more confidence in us, as they never explicitly tell you whether an audit is complete or if everything is in order. If you don't hear back, that's considered good news. But I believe we've experienced enough full and partial audits to understand that we're "saints above saints" when it comes to compliance.

11. Why ARK and Cathie are so transparent on social media

Jen: Cathie, you share a lot of information on social media, including transaction records, and it's publicly accessible, which is completely different from many of your competitors. Why is transparency so important to you and has become such a core part of your business?

Cathie Wood: After the financial crisis of 2008 and 2009, we began observing changing trends in the financial markets. During a brainstorming session at my previous company, we noticed a phenomenon: mutual funds were losing market share to exchange-traded funds (ETFs). At the time, I didn't even know much about ETFs, as they existed almost exclusively in the passive investing world, not the active management world we were in. We were active investors who traded daily, while passive investors might only rebalance their portfolios once a quarter or even six months.

Once I truly understood the mechanics of ETFs, I immediately thought, "Why can't we integrate active funds into an ETF structure?" So I volunteered to work on this project at my previous company, which had already secured an SEC exemption. I realized two things: First, this would be a game-changer for mutual funds, as ETFs offer lower fees; and second, ETFs offer greater transparency in every way. The 2008-2009 crisis had left investors with a loss of trust in the financial system, and they were looking for a way to stay on top of their fund managers, a need we fulfilled.

Many asset managers today are either completely passive or heavily benchmark-tracking, resulting in nearly identical holdings, such as a near-universal overweight position in a few large-cap tech stocks (see Mag 6). We are different. Our goal is to provide investors with exposure to the future of investment. In a technological revolution, some giants will be disrupted, while others will adapt, but we reserve our largest positions for pure disruptors.

From 2021 to early 2024, the market was bullish, but the gains were concentrated in a few stocks, especially Mag 6. We say this is not a healthy bull market. A healthy bull market spreads to more companies, which is what has begun to happen this year.

To get back to your question, we've stuck with this model because transparency is a genuine market demand. In 2020, we couldn't have anticipated the impact this approach would have. The pandemic lockdowns kept investors globally at home, focusing on online shopping and investing. We publicly shared our research and trading records daily, which resulted in countless YouTube videos explaining our trades, particularly in Asia. This unexpectedly helped us grow into a global brand.

At the beginning of the pandemic, my economics background quickly informed my judgment: massive monetary and fiscal stimulus, soaring savings rates (as high as 27% and now only 4-5%), combined with supply chain disruptions, were a recipe for both economic boom and bust. Indeed, supply constraints, rising inflation, and aggressive Federal Reserve interest rate hikes put significant pressure on innovative companies outside of the Mag 6 sector. Despite this, our openness and transparency enabled investors to understand our rationale and stay with us.

12. Will AI surpass ARK?

Jen: We're running out of time, so I have two more questions. Back to those thoughts about the future, you've been researching AI so much. Are you worried that AI will one day surpass ARK in investment?

Cathie Wood: I would look at it from two perspectives. AI is most likely to replace passive investing and benchmark-sensitive strategies, as these strategies are highly standardized and many investors are chasing safe bets like Mag 6. Quantitative strategies, on the other hand, segment the market based on historical factor analysis, such as growth, quality, volatility, and profitability. However, a large portion of our strategies are labeled "residual" in their models because the future will not resemble the past, and quantitative strategies are based on the past.

Therefore, I believe quantitative analysis will be completely commoditized by AI. Our strategy relies on original research, and we even proactively open up our research findings to AI, such as OpenAI and Grok, to help us with pattern recognition and efficiency improvements, particularly in the application of Wright's Law. Wright's Law is similar to Moore's Law, but it predicts cost reduction based on output rather than time. We use it to predict technology cost curves, a very time-consuming process, but AI can significantly accelerate this work. AI will be a powerful tool, but I would not underestimate the creativity of human research teams.

13. Cathie’s advice to her younger self

Jen: I want to end with a question that echoes the one I started with: If you could go back to your 20-year-old self, what would you say?

Cathie Wood: I would say: well done, keep an open mind, and don't panic. If you're not sure what you want to do in college, try whatever interests you. I've found, both myself and the colleagues who joined our company, that if you immerse yourself in a field you're passionate about and willing to learn, life can be very enjoyable. While it's not completely stress-free, it's generally worth it.

I absolutely love my job. Everything happening in innovation today was seeded in the first 20 years of my career, and I've been fortunate to witness its germination and growth. In the late 1990s, capital poured into sectors like the internet and biotech. We knew the technology wasn't ready for scalability and the costs were prohibitive. For example, sequencing the first human genome in 2003 cost $2.7 billion; today, it only costs $200. Yet, right now, this sector with the greatest potential is performing the worst in the market. This reflects investor sentiment: when money is easy, it's often a bubble; when everyone worries about everything and ignores the most important opportunities, it's the beginning of a healthy bull market.

And this bull market is spreading to more areas, and we are very happy that blockchain is among them. It is really important to allow the traditional financial system to have more exposure to this new asset class.