Cryptocurrency prices have been sagging lately, but those market observers believing the asset class is still in its infancy and that more growth is coming in the years ahead may be onto something.
Coinbase CEO Brian Armstrong believes that over the coming decade, one billion people around the world will have tried or will remain engaged with crypto assets. That forecast highlights long-term allure with exchange traded funds, including the ARK Fintech Innovation ETF (ARKF).
“My guess is that in 10-20 years, we’ll see a substantial portion of GDP happening in the crypto economy,” Armstrong said at the Milken Institute Global Conference on Monday.
Coinbase is the second-largest component in the actively managed ARKF at a weight of 8.67%. Armstrong’s comments were made as bitcoin, the largest cryptocurrency, is down 17% year-to-date. ARKF, Coinbase, and other equity-based plays on the crypto universe are highly correlated to bitcoin prices this year, but some well-known investors say there are factors beyond bitcoin to consider. Those include the rapid expansion of the decentralized finance (DeFi) space.
“In the case of DeFi and next-generation internet, we are seeing a lot of financial companies losing talent to crypto,” said ARK Investment Management founder Cathie Wood at the conference. “So they have to take it seriously, or else they are going to be hollowed out.”
That’s relevant to Coinbase because the crypto exchange operator offers investors an expansive menu that goes far beyond bitcoin. For its part, ARKF, which turned three years old earlier this year, covers multiple bases in the crypto ecosystem, and that could be to the benefit of long-term investors.
For example, the ARK Investment Management ETF allocates 11.28% of its weight to Block (NYSE:SQ). Likewise, ARKF devotes 4.72% of its weight to Silvergate Capital (NYSE:SI). Silver features a rapidly expanding crypto payments platform that counts crypto exchanges, crypto companies, and other market participants among its clients.
Other ARKF components with exposure to the crypto expansion theme include Robinhood (NASDAQ:HOOD) and DraftKings (NASDAQ:DKNG). That duo combines for over 7% of the ETF’s weight. The removal of regulatory murkiness could also serve as a catalyst for broader crypto adoption, in turn potentially bolstering shares of ARKF and Coinbase.
“Regulatory uncertainty in the U.S. continues to impede crypto’s advance, Wood said. Regulatory clarity in crypto has been happening at a much slower pace than with the internet, she said,” reports Olga Kharif for Bloomberg.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.