Original Article Title: Why Cathie Wood's ARK Invest Modified Its $1.5M Target | CoinDesk Spotlight

Original Source: CoinDesk

· Host: Jennifer Sanasie

· Guest: Cathie Wood, Founder, CEO, and CIO of ARK Invest

· Air Date: 2025.8.15

Introduction

In the realm of digital assets and innovative finance, market shifts often exceed expectations. Cathie Wood has been surprised by the rapid adoption of stablecoins and has highlighted in her optimistic forecasts that even with the most conservative adjustments, the potential over the next five years far exceeds expectations. As she describes in the "Big Ideas 2025" scenario, investing in emerging markets and cutting-edge technologies not only presents abundant opportunities but also requires investors to have foresight and keen insight. In this interview, we will delve into Cathie's investment philosophy, market observations, and how she seizes innovative opportunities in a turbulent financial environment.

1. Setting Sail: Cathie's Investment Journey

"We have been very surprised by the speed of stablecoin adoption. If there were any adjustments to our $1.5 million forecast, you might see, you can see in 'Big Ideas 2025' how we built that optimistic scenario, we might take a little bit out of the emerging markets part of that expectation. I think we can say with conviction that over five years, our optimistic scenario is well over a million, well over a million dollars." - Cathie Wood

Jen: Cathy Wood, welcome to CoinDesk Spotlight.

Cathie Wood: Thank you, Jen, glad to be here.

Jen: We're very excited to have you. So let's start from here, looking back, when was it roughly that you first became interested in the market, the financial system, and the importance of innovation?

Cathie Wood: Oh my goodness... in college, I really didn't know what I wanted to do, so I tried almost everything, engineering, education, geology, astronomy, physics... all of it.

Jen: You are really an all-field explorer.

Cathie Wood: Yes, indeed. And the reason I didn't take an economics class, to be honest, is because my father always wanted me to study economics, so I intentionally postponed it. It wasn't until the last semester of my sophomore year at UCLA that I finally took my first economics class, and I fell in love with it. At that time, I also realized that I couldn't take more business courses at UCLA because there was only a graduate business school there... So I transferred to USC, where I met Art Laffer.

Maybe I'm going into too much detail, but it's okay. Art Laffer is a renowned economist, known for the "Laffer Curve." When he saw my passion for economics, he introduced me to the largest and arguably most prestigious investment firm in Los Angeles at the time, Capital Group.

The first time I walked into the company, I knew almost nothing about how the financial world operated. But there, for the first time, I felt that economics could be closely integrated with these exciting market activities. More importantly, I realized, "Wait, our job is to continually learn, and we get paid for it? That's amazing! We can even use our understanding to deduce how the world operates."

I started my career at Capital Group when I was 20, and from that moment on, I knew I would spend my life in this industry.

II. Meeting Art Laffer and Falling in Love with Economics

Jen: What sparked your passion for economics? After all, you had tried almost every major before and even somewhat rebelled against your father.

Cathie Wood: Yes, to some extent. But my relationship with my father has always been good, and that kind of "rebellion" is more of a normal teenage rebellion. What really made me turn to economics was the charismatic way Art Laffer taught.

After I transferred to USC, he would start each class with a joke to set the mood, and then place that day's topic in the context of the real world, explaining "why we should study this." By the end of class, you would find the chalkboard covered with formulas.

He always guided us in a very vivid way, introducing us to different schools of economic thought: Keynesianism from Harvard, Monetarism from the Chicago School. The perspective he promoted at USC was from the Supply-side school, and to some extent, was 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, and even monetarists were considered a "minority." Later, I witnessed firsthand the shift to supply-side economics during the Reagan era. It was because of my studies at USC that I was well-prepared for the most astonishing bull market of the 1980s and 1990s.

However, when I first started working in New York, I couldn't openly discuss Laffer's views. The core argument of supply-side economics, "When tax rates are too high, tax cuts will increase revenue," was hard to believe in the context of the early 1980s economic recession. At that time, the Federal Reserve raised interest rates to over 15%, with mortgage rates even exceeding 20%, plunging the economy into a deep recession. It was only a few years later in such an environment that I had the opportunity to express these views more candidly.

Three, On Federal Reserve Rates, Economic Outlook, Real Estate, and Innovation

Jen: Hearing you share these experiences and your responses, I'd like to bring the discussion back to the present. Today, when we are recording this episode, the Federal Reserve just announced keeping rates unchanged. I'm curious, how do you view the future trajectory of interest rates?

Cathie Wood: I think today's voting results were quite interesting, with two board members casting dissenting votes. This situation hasn't occurred since 1993, and I remember it vividly because I was also in the industry at that time. Symbolically, this is significant because Chairman Powell has always hoped for unanimous voting, and this time there was a division.

Part of the reason may be Powell's term ending in May next year; perhaps these two members are "competing" for that position? Who knows. It may also be because they noticed some changes. I haven't finished reviewing all the meeting minutes, but I've seen the real estate market clearly showing signs of a downturn, with prices in many areas barely responding to tariff increases. They might be thinking, "Wait a minute, maybe the biggest surprise in the next six months is a significant drop in inflation."

The recent employment data is a bit of a mixed bag, with some indicators strong and others weak. But I've noticed that the unemployment rate for recent college graduates is rising, as many entry-level positions are being automated, especially by AI.

We have always believed that the U.S. economy is currently in a "rolling recession." Over the past year, the Fed has raised rates 22 times, one industry after another is collapsing, starting with real estate. By many standards, real estate is still 35% below its peak, and some indicators are once again plummeting.

I anticipate that housing-related inflation will continue to decline. Various monthly data sources are already showing year-over-year declines, though not yet broad-based except for median prices of existing homes. But if sellers truly want to sell and rates don't fall, they will have to reduce prices. Once prices drop, the biggest surprise in the latter half of this year might be a significant drop in inflation.

It is important to note that the impact of a decline in housing prices shows up in the statistical data with a significant lag and then “disappears” from the data, so this effect will persist for a while.

We believe that as uncertainties such as tariffs, taxation, government spending, and regulation gradually dissipate, the U.S. economy is transitioning from a “rotational recession” to a stronger-than-expected recovery. Over the next 6 to 9 months, this will be reflected in productivity gains. Despite the overall slow pace of economic growth, year-over-year productivity has already exceeded 2%, and I believe it will go even higher because the technologies we are focusing on—such as robotics, energy storage, AI (especially important), blockchain, and multi-sequence—have enormous potential for productivity improvement.

Most of these innovations are deflationary, with AI being the most typical example. The annual cost of AI training is decreasing by 75%, and the inference cost, which is the cost of inputting questions into systems like ChatGPT or Grok (I now use Grok more often) and getting answers, is decreasing by 85% to 98% annually (even 98% in China). Cost reduction will greatly drive usage growth.

So we believe this is “benign deflation,” unlike the “bad deflation” of 2008–2009. For companies on the technological frontier, this is a positive development; for disrupted companies, it is pressure, and they will have to lower prices. We believe the future will usher in a more deflationary world than most economists and strategists expect.

IV. How the New Regulatory Environment Drives Agentic AI and Blockchain Innovation

Jen: You just mentioned the outlook for the next 6 to 9 months. In the strong recovery you envision, what role will cryptocurrency play?

Cathie Wood: The shift in the regulatory environment is crucial. We have just gone through a period of hostile regulation led by SEC Chairman Gary Gensler, transitioning to the current legislative-led and extremely friendly situation. Now we are guiding regulation through a legal framework rather than using “enforcement-style regulation” to suppress innovation. The previous approach forced many innovative projects to leave the United States and flow to other countries.

The situation is rapidly improving, especially since David Sacks was appointed to oversee both cryptocurrency and AI affairs, bringing the concept of “Agentic AI” to the fore. Agentic AI refers to AI agents that can autonomously perform specific tasks such as walking, working, and communicating. Of course, it has its limitations. To enable these AIs to operate efficiently, smart contracts are essential because AI agents need to interact with websites, such as purchasing certain content or services on CoinDesk, where the payment process requires automated smart contracts to execute. This is the entry point for the integration of AI and blockchain technology.

Prior to this, we have already seen a similar revolution in the financial services sector. After receiving regulatory approval, an increasing number of financial institutions are entering the blockchain space as they realize the significant cost savings.

I like to compare this scenario to the early days of the Internet in the late 1980s and early 1990s. At that time, the developers building the Internet hardly ever thought about bringing financial services or businesses online, so there was no native payment layer. It is only today that we truly have this layer thanks to blockchain. Over the past 30-40 years, due to the lack of a payment infrastructure, traditional finance had to rely on numerous intermediaries to reduce risk after going online with credit cards, resulting in almost a "system tax" where each transaction incurred a fee of 2%-3.5%.

Blockchain can reduce this "tax" from 3.5% to about 1% (in Nigeria, it can even go from 20% to close to 1%). The global financial services asset management scale is expected to reach $250 trillion in 5 years. If you can reduce costs by 2-2.5 percentage points in such a large market, it will be a disruptive improvement in friction and efficiency.

Cost is just one aspect. In terms of productivity, Agentic AI + Smart Contracts + API to API automatic transactions (including microtransactions) will also have equally profound effects.

Five, Ethereum, Agentic AI, and ARK's Investment Logic in Bitmine

Jen: You previously bet on Tom Lee's Bitmine, and ARK is also one of the institutions with the largest Ethereum (ETH) reserves. Is this related to the Agentic AI and smart contracts mentioned earlier? Do you believe that Ethereum will become the foundational layer supporting a high-efficiency Agentic AI world?

Cathie Wood: Yes. We have been closely watching which protocol institutions choose to access when formulating their digital asset strategy. First, Coinbase chose Ethereum for its Layer 2 network Base, and recently Robinhood's Layer 2 is also built on Ethereum. We have long had an assumption that Ethereum will become an institutional-grade protocol. Although Solana significantly outperformed Ethereum for a period of time, many people questioned our judgment. However, from the voting (actual deployment) perspective, Ethereum, although with higher transaction costs and slower speed, is more secure due to its decentralization, while Solana is more likely to dominate in consumer-facing applications.

Regarding the investment in Bitmine, this is actually the first time we have been able to gain a stable exposure to Ethereum in an ETF. Directly investing in other funds or ETFs presents many issues, including tax implications (such as the "bad income" clause, where if a type of revenue exceeds 10% of the fund's annual profit, it may lose tax benefits or even be forced to shut down), additional fees, and so on. We cannot afford this risk, so we have not been able to find a suitable path. Bitmine provides a solution, despite the premium. The Ethereum treasury has more utility than the Bitcoin treasury, such as staking, while ETFs cannot currently stake ETH.

In addition, we are also a cornerstone investor in Circle, and have been closely following the explosive growth of stablecoins, with most stablecoin activity happening on Ethereum. These factors combined have increased our confidence in Ethereum's potential as the foundational layer for Agentic AI, and also explain our investment logic in Bitmine.

Six, Case Study: Bitcoin Breaking $1 Million

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

Cathie Wood: If you were to ask me what the biggest surprise of the past decade was, in 2014 we founded ARK and in 2015 we released the first Bitcoin whitepaper. At that time, we believed that Bitcoin would play the role stablecoins play today in emerging markets. The story of Tether was completely unexpected. Co-founder Paolo told me that it wasn't until the outbreak of the pandemic that they realized Tether would become an important way for emerging markets to access the US dollar. At that time, children would tell their parents, "Today we don't need to go to the black market to exchange for dollars, we can do it directly on the Internet." That was the turning point for its popularization.

We didn't expect stablecoins to so quickly replace Bitcoin's role in this area. If we were to adjust the $1.5 million prediction, we might slightly lower the contribution from emerging markets. But the larger driver still comes from two points: firstly, Bitcoin is becoming the main entry point for institutions into the digital asset market; and secondly, Bitcoin is replacing gold as a store of value. These two rationales have never changed, so we still believe that Bitcoin will surpass $1 million within five years, and may even go well beyond that figure.

Seven, Cathie's Top 3 Cryptocurrencies and Crypto-related Stocks

Jen: Let's talk about your focus beyond Bitcoin. With continuous innovation in the cryptocurrency field, it seems that your vision has extended beyond Bitcoin, and even your price expectations for 2030 have been adjusted. From your perspective, what are the most noteworthy blockchain protocols or projects to focus on right now?

Cathie Wood: We primarily invest in the public markets, while also taking on the responsibility of educating investors, much like CoinDesk's role, so we carefully guide clients into the crypto ecosystem. Currently, our core holdings are Bitcoin (BTC) and Ethereum (ETH). In our private funds, we have previously had a relatively heavier position in Solana (SOL), but recently we promptly adjusted the weighting as Ethereum's performance surpassed Solana.

These three (BTC, ETH, SOL) are our current "top three." We are also keeping an eye on Layer 2 solutions. From an educational investor's perspective, we will delve deeper into analyzing these three major assets using language familiar to the investment community, such as Risk-Reward Ratio, Sharpe Ratio, Sortino Ratio, etc. Relevant research papers are currently in preparation.

Furthermore, we will draw inspiration from the "Bitcoin Monthly" model, which may evolve into a bimonthly publication. In alternating months, we will release analyses of Ethereum, Solana, and other potential protocols, especially highlighting their on-chain analytics to showcase their signal characteristics. This transparency, not present in the stock or bond markets, is particularly valuable for institutional investors.

Jen: Earlier, you outlined your top three cryptocurrencies in the ecosystem. So, in terms of crypto-related public companies, do you have a similar "top three" list?

Cathie Wood: In our flagship ARK fund, ARKK, the FinTech fund ARKF, and the next-generation Internet fund ARKW (covering crypto and AI themes), Coinbase, Circle, and Robinhood consistently rank in the top ten. While Robinhood is not strictly a crypto company, we have been inquiring about their crypto strategy in quarterly communications for three years. Back then, they were contracting, and our attention waned. However, now they are fully embracing the crypto space. If you've watched their Analyst Day or new product launches, you'll see that their goal is to dominate.

Eight, Why is MSTR not in the top three

Jen: So, MicroStrategy is not among your top three?

Cathie Wood: MicroStrategy is indeed a bet on Bitcoin, given it is the largest asset in that space. However, Coinbase is also significantly influenced by the Bitcoin trend and has a broader reach in the crypto market. Additionally, while Bitmine may not be in the top ten, as Ethereum gains popularity among institutions, we believe its strategic position is also rising.

Nine, Will Quantum Computing Threaten Bitcoin?

Jen: Cathie, I'm eager to hear your thoughts since you are known for "betting on the future" and have the ability to foresee trends, making bold decisions in new technologies. We've previously discussed how many are contemplating their position in the future world now. In the realm of Bitcoin, there's an assertion that quantum computing might jeopardize Bitcoin's security. As you are here today, I'm particularly curious about whether you think quantum computing could realistically threaten the Bitcoin ecosystem?

Cathie Wood: Of course, this is a question we discuss frequently. In fact, the reason we promoted our former research director to Chief Futurist is because these critical long-term survival issues are paramount. He, along with our team, especially David Puell from the crypto team (many well-known on-chain metrics are named after him), are deeply engaged in this. Brett (Chief Futurist) and David have been evaluating breakthroughs in the field of quantum computing that we have been hearing about. There have indeed been some advancements, but mostly incremental progress, still far from a true technological leap. We assess that if quantum computing does pose a threat to Bitcoin, it may only be in the late 2030s or even the 2040s.

One reason is that the development of artificial intelligence has far surpassed expectations, even exceeding what we had envisioned when founding ARK. Many tasks that were originally expected to be accomplished by quantum computing are now likely to be achieved by AI first. Furthermore, AI performance has not shown a so-called "ceiling" effect; on the contrary, the more computing power is invested, the faster the performance improves. This means that much of the capital that was expected to flow into quantum computing may continue to be concentrated in the AI field in the near term, and we also want to see how far AI can go.

10. Threat of Innovation

Jen: You have mentioned that the team, when formulating investment theses, repeatedly discusses these "existential issues" concerning the future. Which ones keep you up at night?

Cathie Wood: Over the past few years, our greatest concern has been the deteriorating trend of regulation in the United States. In the last four years, we have even seriously considered shifting more towards seeking new ideas overseas, especially in the blockchain field, because the U.S.' innovation environment is being completely stifled. You see, blockchain is the next-generation internet, and the rise of the previous generation of the internet allowed the U.S. to lead the global tech revolution. If we miss this wave of opportunity, the U.S. is likely to hand over the reins of the next, even greater, tech wave.

From an investment perspective, the landscape in other parts of the world is more diversified, but going to Europe means facing the dual regulatory pockets of the EU and its member states, along with geopolitical risks. So, for us, this is a very real threat. I remember during a live stream or online seminar, I bluntly said, "Chairman Gensler is a menace to innovation." After saying that, I realized, we are an institution regulated by the SEC, would this come back to haunt us? After all, there were indeed some retaliatory regulatory actions at that time. But we still decided we had to speak out because this is not only about us but also about the future of the entire U.S. tech sector, even if it means taking risks.

Jen: Has the SEC ever reached out to you due to your remarks?

Cathie Wood: No, we have not received any direct feedback. Of course, like all investment firms, the SEC regularly examines us. Especially since our way of doing things is very transparent. For example, we were the first firm to release research for free on social media, openly share our trading activity daily, and maintain a high level of transparency on our portfolios. Mutual funds wouldn't do this as it would bring more SEC scrutiny risk. But we knew early on that we would be frequently examined, so we must be absolutely meticulous in compliance.

Our Chief Compliance Officer served as an examiner at the SEC for four years, and we have always held ourselves to that standard. I'm not sure if the SEC is more at ease with us because of this, as they never explicitly tell you if the examination is over, if everything is okay, but if you don't get a response, that's considered good news. However, I believe after experiencing comprehensive or partial examinations enough times, they also know that we are "holier than the saints" when it comes to compliance.

11. Why ARK and Cathie Maintain High Transparency on Social Media

Jen: Cathie, your firm shares a lot of information on social media, including trading records, and it's publicly accessible, which is very different from many competitors. Why is transparency so important to you, even becoming a core part of your strategy?

Cathie Wood: After the 2008-2009 financial crisis, we began to observe the changing trends in the financial markets. During a brainstorming session at my previous company, we noticed a phenomenon: mutual funds were losing market share, being gradually replaced by ETFs. At that time, I didn't even know much about ETFs because they mostly existed in the passive investment space, not the active management space we were in. We were active investors who traded every day, while passive investments might rebalance only once a quarter or half a year.

When I truly understood how ETFs worked, I immediately thought, "Why not put actively managed funds into the ETF structure?" So I voluntarily drove this project at my previous firm, which already had SEC exemptive relief. That's when I realized two things: first, this would disrupt mutual funds because ETFs had lower fees; second, ETFs were more transparent in every aspect. The crisis of 2008-2009 made investors lose trust in the financial system, and they wanted to be in sync with fund managers, which we could fulfill.

Today, many asset management firms have either gone entirely passive or become "highly benchmarked," resulting in almost identical holdings, such as heavily concentrated in the same handful of large tech stocks (Mag 6). This is not our approach. Our goal is to offer investors an investment exposure to the future operational modes. In the technological revolution, some giants will be disrupted, some will adapt, but we will reserve the highest stakes for the "pure disruptors."

From 2021 to early 2024, although the market was in a bull run, the rise was concentrated in a few stocks, especially the Mag 6. We said that this was not a healthy bull market. A healthy bull market would spread to more companies, and that is exactly what has been happening since this year.

Returning to your question, the reason we adhere to this model is because transparency is a true need in the market. In 2020, we did not anticipate that this approach would have such a significant impact. The pandemic lockdown forced global investors to stay at home, engaging in either online shopping or online investing. By openly sharing our research and trading records every day, numerous videos interpreting our trades started to appear on YouTube, especially in Asia, unexpectedly transforming us into a global brand.

At the beginning of the pandemic, my background in economics allowed me to quickly form a clear judgment: massive monetary and fiscal stimulus, soaring savings rates (peaking at 27%, now only 4-5%), combined with disrupted supply chains, formed the recipe for economic boom and volatility. And indeed, this has been the case, with supply shortages, rising inflation, and the Fed aggressively hiking rates, putting immense pressure on innovative companies outside the Mag 6. Regardless, our openness and transparency have allowed investors to understand our reasoning and journey alongside us.

Twelve, Will AI Surpass ARK?

Jen: Time is running short, and I have two more questions. Stepping back into those forward-looking considerations, given your extensive research on AI, are you concerned that AI might one day surpass ARK in investments?

Cathie Wood: I would view this from two perspectives. The easiest aspect of AI to replace is passive investing and "benchmark-sensitive" strategies because these strategies are already highly standardized, and many investors are chasing after the safety nets of the Mag 6. Quantitative strategies are based on historical factor analysis, such as growth, quality, volatility, profitability, etc., to segment the market. However, our strategy has a significant portion marked as "Residual" in their models because the future will not resemble the past, and quant models are based on the past.

Therefore, I believe that quant 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, Grok, and other large models, to assist us in pattern recognition and efficiency improvement, especially in the application of Wright's Law. Wright's Law is similar to Moore's Law but predicts cost reduction based on output rather than time. We use it to predict the cost curve of technology, a very time-consuming process that AI can significantly accelerate. AI will be a powerful tool, but I will not underestimate the creativity of human research teams.

13. Cathie's Advice to Her Younger Self

Jen: I'd like to end the interview with a question that echoes the beginning. 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 in college and still unsure of your future direction, go ahead and try anything that interests you. I've found that both myself and my colleagues who have joined our company, if you dive into a field you love and are willing to learn, life will be enjoyable. It may not be completely stress-free, but it's worth it overall.

I'm very passionate about my current work. Everything happening in the innovation space today was seeded in the first 20 years of my career, and I've been fortunate to witness them sprout and grow. In the late 90s, capital flooded into areas like the internet and biotech, but we knew then that the technology wasn't ready for scale, and the costs were too high. For example, the first human genome sequencing completed in 2003 cost $2.7 billion, whereas today it's just $200. However, now, this most promising sector is performing the worst in the market, which reflects investor sentiment. When making money is easy, it's often a bubble; when everyone worries and overlooks the most important opportunities, it's usually the start of a healthy bull market.

Furthermore, this bull market is spreading to more areas, and we are excited that blockchain is also included, allowing the traditional financial system to engage more with this new asset class. This is really important.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia