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

Original Source: CoinDesk

· Host: Jennife Sanasie

· Guest: Cathie Wood, Founder, CEO, and Chief Investment Officer of ARK Invest

· Broadcast Date: 2025.8.15

Introduction

In the realm of digital assets and innovative finance, market changes often exceed expectations. Cathie Wood is surprised by the rapid adoption of stablecoins and points out in her optimistic forecast that even with the most cautious adjustments, the potential over the next five years remains far beyond expectations. As she describes in "Big Ideas 2025," investing in emerging markets and frontier technologies is not only full of opportunities but also requires investors to possess forward-thinking and keen insights. Through this interview, we will gain a deeper understanding of Cathie's investment philosophy, market observations, and how she seizes innovative opportunities in a turbulent financial environment.

1. The Journey Begins: Cathie's Investment Path

"We are very surprised by the speed of stablecoin adoption. If we were to make any adjustments to the $1.5 million forecast, you might see how we constructed this optimistic scenario in 'Big Ideas 2025.' We might slightly pull back from our expectations for emerging markets. I think we can say with complete confidence that in five years, our optimistic scenario is far more than a million, well beyond a million dollars." - Cathie Wood

Jen: Cathie Wood, welcome to CoinDesk Spotlight.

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

Jen: We are also very pleased to have you. Let's start here; looking back, when did you first become interested in the market, the financial system, 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 almost everything—engineering, education, geology, astronomy, physics… I touched on all of it.

Jen: You really explored across all fields.

Cathie Wood: Yes, I really did. And the reason I didn't take economics classes, to be honest, was that my father always hoped I would study economics, so I deliberately put it off until the end. It wasn't until my last semester of sophomore year at UCLA that I took my first economics class, and I fell in love with it right away. At that time, I also realized that UCLA wouldn't let me take many business courses because they only had a graduate business school… So I transferred to USC, where I met Art Laffer.

I might have gone into too much detail, but that's okay. Art Laffer is a famous economist, the proposer of the "Laffer Curve." He saw my passion for economics and introduced me to Capital Group, which was the largest and possibly the most prestigious investment company in Los Angeles at the time.

When I first walked into the company, I knew almost nothing about how the financial world operated. But there, I felt for the first time that economics could be closely tied to these exciting market activities. More importantly, I realized, "Wait a minute, our job is to keep learning, and we get paid for it? That's 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 stay in this industry for a lifetime.

2. Meeting Art Laffer and Falling in Love with Economics

Jen: What ignited your passion for economics? After all, you had tried almost every major before and even had a bit of a rebellious phase with your father.

Cathie Wood: Yes, a little bit. But my father and I have always had a good relationship; that kind of "rebellion" was more of a normal teenage phase. The real turning point for me towards economics was Art Laffer's captivating teaching style.

After I transferred to USC, he would start each class with a joke to set the atmosphere, and then he would place the day's topic in the context of the real world, explaining "Why learn this?" By the time the class was nearing the end, you would find the blackboard filled with formulas.

He always guided us in a very vivid way while exposing us to different schools of economic thought: Harvard's Keynesianism, Chicago School's monetarism. What he promoted at USC was the supply-side perspective, which is even somewhat 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 during the Reagan administration how the global economic thought shifted towards supply-side economics. Because of my studies at USC, I was well-prepared for the most astonishing bull market in the 80s and 90s.

However, when I first started working in New York, I couldn't openly discuss Laffer's views. The core assertion of supply-side economics, "When tax rates are too high, tax cuts can actually increase tax revenue," was hard to convince people of in the context of the early 1980s recession. At that time, the Federal Reserve raised interest rates above 15%, and mortgage rates even exceeded 20%, plunging the economy into a deep recession. In that environment, it took me a few years before I could express these views more candidly.

3. On Federal Reserve Rates, Economic Outlook, Real Estate, and Innovation

Jen: Hearing you share these experiences and your responses, I want to bring the topic back to the present. Today, as we record the program, the Federal Reserve has just announced that it will keep interest rates unchanged. I'm curious, how do you view the future trajectory of interest rates?

Cathie Wood: I find today's voting results quite interesting, with two members voting against it. This hasn't happened since 1993, and I remember it clearly because I was in the industry at that time. This is symbolically significant, as Chairman Powell has always hoped for unanimous votes, and this time there was a divergence.

Part of the reason might be that Powell's term will end next May, and perhaps these two members are "competing" for that position? Who knows. It could also be that they have noticed some changes; I haven't finished reading all the meeting minutes, but I've already seen that the real estate market is clearly retreating, with many areas' home prices showing almost no response to rising tariffs. They might be thinking, "Wait a minute, maybe the biggest surprise in the next six months is a significant drop in inflation."

Recent employment data has been somewhat "mixed," with some indicators strong and others weak. But I've noticed that the unemployment rate for recent college graduates is rising because many entry-level positions are being automated, especially replaced by AI.

We have always believed that the U.S. economy is currently in a "rolling recession," with the Federal Reserve raising interest rates 22 times over the past year, crushing one industry after another, starting with real estate. By many standards, real estate is still 35% lower than its peak, and some indicators are again declining sharply.

I expect housing-related inflation to continue to decrease. Various monthly data sources have already shown year-on-year declines, although it hasn't fully rolled back except for the median price of existing homes. But if sellers really want to sell their homes and interest rates don't drop, they can only lower their prices. Once prices drop, the biggest surprise in the second half of this year could be that inflation falls very low.

It's important to note that the transmission of falling home prices into statistical data, and then "disappearing" from the data, has a long lag period, so this impact will last for a while.

We believe that as uncertainties around tariffs, taxes, government spending, and regulations gradually diminish, the U.S. economy is moving from a "rolling recession" to a recovery that is stronger than expected. This will be reflected in productivity improvements over the next 6 to 9 months. Although the overall economic growth rate is slow, productivity has already exceeded 2% year-on-year, and I believe it will be even higher because the technologies we focus on—robotics, energy storage, AI (especially important), blockchain, and multi-sequencing—have tremendous potential for productivity enhancement.

Most of these innovations are deflationary, with AI being the most typical example. The cost of training AI is decreasing by 75% each year, and the cost of inference, which is the cost of inputting questions and getting answers in ChatGPT or Grok (which I use more often now), is decreasing by 85% to 98% each year (with data from China even at 98%). The drop in costs will greatly drive the growth in usage.

So we believe this is "benign deflation," unlike the "bad deflation" of 2008-2009. This is beneficial for companies at the technological frontier; for companies being disrupted, it poses pressure, and they will have to lower their prices. We believe we are entering a world that will be more deflationary than most economists and strategists expect.

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

Jen: You just mentioned the outlook for 6-9 months; in your envisioned strong recovery, what role will cryptocurrencies play?

Cathie Wood: The shift in the regulatory environment is crucial. We have just experienced a hostile regulatory period led by SEC Chairman Gary Gensler, transitioning to a now legislative-driven and extremely friendly situation. Now, regulation is guided by a legal framework rather than "enforcement-style regulation" that suppresses innovation. The previous approach forced many innovative projects to leave the U.S. for other countries.

The situation is rapidly improving now, especially with David Sacks being appointed to oversee both crypto and AI affairs, and the concept of "Agentic AI" has emerged. Agentic AI refers to AI agents that can autonomously perform specific tasks such as walking, working, and communicating. Of course, their capabilities have certain boundaries. To enable these AIs to operate efficiently, smart contracts are central because AI agents need to interact with websites, such as purchasing certain content or services on CoinDesk, and the payment process requires automated smart contracts to execute. This is precisely the entry point for the integration of AI and blockchain technology.

Before this, we had already seen similar revolutions in the financial services sector. After the regulatory green light, more and more financial institutions are entering the blockchain space because they find it can significantly reduce costs.

I like to compare this situation to the early days of the internet in the late 1980s and early 1990s. At that time, the developers building the internet hardly thought that financial services or commerce would move online, so there was no native payment layer. It wasn't until today that we truly have this layer because of blockchain. Over the past 30-40 years, due to the lack of a payment infrastructure, traditional finance had to rely on a large number of intermediaries to reduce risks after credit cards went online, resulting in 2%-3.5% fees being taken from each transaction, which almost became a kind of "system tax."

Blockchain can reduce this "tax" from 3.5% to about 1% (in Nigeria, it can even drop from 20% to nearly 1%). We expect the global financial services asset management scale to reach $250 trillion in five years. If you can reduce costs by 2-2.5 percentage points in such a large market, that would be a disruptive improvement in friction and efficiency.

Costs are just one aspect. In terms of productivity, the combination of Agentic AI + smart contracts + API-driven automated trading (including micro-trading) will also have similarly profound impacts.

5. The Logic Behind Ethereum, Agentic AI, and ARK's Investment in Bitmine

Jen: You previously bet on Tom Lee's Bitmine, and ARK is currently one of the largest institutional holders of Ethereum (ETH). Is this related to the Agentic AI and smart contracts you just mentioned? Do you think Ethereum will become the foundational layer supporting an efficient Agentic AI world?

Cathie Wood: Yes. We have been closely observing which protocols institutions choose to integrate as they formulate their digital asset strategies. First, Coinbase chose Ethereum for its Layer 2 network, Base, and recently Robinhood's Layer 2 is also built on Ethereum. We have long hypothesized that Ethereum will become an institutional-grade protocol. Although Solana significantly outperformed Ethereum for a time, leading many to question our judgment, from the perspective of actual deployment (voting), Ethereum, despite higher transaction costs and slower speeds, is considered more secure due to its greater decentralization; Solana is more likely to excel in consumer-facing applications.

Regarding our investment in Bitmine, this is actually our first opportunity to gain stable exposure to Ethereum within an ETF. Directly buying into other funds or ETFs presents many issues, including tax implications (such as the "bad income" clause, where if a certain type of gross profit exceeds 10% of the fund's annual profit, it may lose tax benefits or even be forced to shut down) and layered fees. We cannot take on such risks, which is why we have struggled to find a suitable path. Bitmine provides a solution; although there is a premium, the utility of the Ethereum treasury is greater than that of Bitcoin's treasury, such as staking, while ETFs currently cannot stake ETH.

Additionally, we are cornerstone investors in Circle and have been closely monitoring the explosive growth of stablecoins, most of which are occurring on Ethereum. These factors combined give us greater confidence in Ethereum's potential as the foundational layer for Agentic AI and explain our logic for investing in Bitmine.

6. The Case for Bitcoin Surpassing $1 Million

Jen: Will this change your view on Bitcoin? I know you predict that Bitcoin will rise to $1.5 million by 2030; will this prediction be adjusted?

Cathie Wood: If you ask me what the biggest surprise of the past decade has been, it would be that in 2014, when we founded ARK, we published our first Bitcoin white paper in 2015. At that time, we believed Bitcoin would play the role that stablecoins do today in emerging markets. The story of Tether was completely unexpected. Co-founder Paolo told me that they only realized during the pandemic that Tether would become an important way for emerging markets to gain exposure to the dollar. At that time, children would tell their parents, "We don't need to go to the black market to exchange dollars today; we can do it directly online." That was the opportunity for its widespread adoption.

We did not anticipate that stablecoins would so quickly replace Bitcoin's role in this area. If we were to adjust the $1.5 million forecast, we might slightly lower the contribution from emerging markets. However, the larger driving forces still come from two points: 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 logics have never changed, so we still believe that Bitcoin will surpass $1 million within five years, and it may even exceed that number significantly.

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

Jen: Let's talk about your focus beyond Bitcoin. With continuous innovations in the crypto asset space, it seems your vision has extended beyond Bitcoin, and even your price expectations for 2030 have been adjusted. From your perspective, what blockchain protocols or projects are currently worth paying attention to?

Cathie Wood: We primarily invest in the public markets while also taking on the responsibility of educating investors, much like CoinDesk does, so we guide our clients into the crypto ecosystem cautiously. Currently, our core holdings are Bitcoin (BTC) and Ethereum (ETH). In our private funds, we had previously been relatively heavily invested in Solana (SOL), but recently, as Ethereum's performance surpassed Solana's, we adjusted our weights accordingly.

These three (BTC, ETH, SOL) are our current "top three." We are also paying attention to Layer 2 networks. From the perspective of educating investors, we will analyze these three major assets more deeply using familiar investment terminology, such as return-risk ratios, Sharpe ratios, and Sortino ratios. Relevant research papers are already in preparation.

Additionally, we will draw on the model of "Bitcoin Monthly," which may become a bimonthly publication in the future, releasing analyses of Ethereum, Solana, and other potential protocols in alternating months, especially showcasing their signal characteristics through on-chain analytics. This level of transparency is not available in the stock or bond markets and is particularly valuable for institutional investors.

Jen: You just listed your top three in the crypto ecosystem. Do you have a similar "top three" list for crypto-related public companies?

Cathie Wood: In our flagship fund ARKK, fintech fund ARKF, and next-generation internet fund ARKW (which covers crypto and AI themes), Coinbase, Circle, and Robinhood all consistently rank in the top ten. Although Robinhood is not a pure crypto company, we have been asking them about their crypto strategy in our quarterly communications for the past three years. At that time, they had scaled back, and we reduced our focus on them. But now they are fully entering the crypto space, and if you have seen their Analyst Day or new product launches, you will find that their goal is to win at all costs.

8. Why MSTR Is Not in the Top Three

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

Cathie Wood: MicroStrategy is indeed a bet on Bitcoin, as it is the largest asset in this field. However, Coinbase is also largely driven by Bitcoin's performance and can cover a broader crypto market. Additionally, while Bitmine is not in the top ten, we believe its strategic position is improving as Ethereum's popularity among institutions rises.

9. Will Quantum Computing Threaten Bitcoin?

Jen: Cathie, I would love to hear your thoughts, as you are known for "betting on the future," and you have the ability to discern trends and make bold decisions on new technologies. We have previously discussed that many people are contemplating their positioning in the future world. In the Bitcoin space, there is a notion that quantum computing may threaten Bitcoin's security. Since you are here today, I particularly want to know if you think quantum computing could really threaten the Bitcoin ecosystem?

Cathie Wood: Of course, this is a question we often discuss. In fact, the reason we promoted our former research director to Chief Futurist is that these long-term survival issues are very important. He and our team, especially David Puell from our crypto team (many well-known on-chain analytics metrics are named after him), are very focused on this. Brett (the Chief Futurist) and David have been evaluating the breakthroughs we hear about in the quantum computing field. There have indeed been some advancements, but more are incremental, and we are still far from a true technological leap. We judge that if quantum computing were to pose a threat to Bitcoin, it might not happen until the late 2030s or even the 2040s.

One reason is that the pace of AI development is far exceeding expectations, even surpassing what we imagined before founding ARK. Many tasks that were originally expected to be completed by quantum computing are now likely to be achieved first by AI. Moreover, AI's performance has not shown any so-called "ceiling" effect; on the contrary, the more computational power invested, the faster the performance improves. This means that much of the capital that might have flowed into quantum computing will continue to concentrate in the AI field in the short term, and we want to see how far AI can go.

10. The Threat of Innovation

Jen: You mentioned that the team often discusses these "survival issues" when formulating investment arguments. What keeps you up at night?

Cathie Wood: Over the past few years, our biggest concern has been the poor regulatory direction in the U.S. In the past four years, we have even seriously considered turning more to overseas sources for new ideas, especially in the blockchain space, because the innovation environment in the U.S. is being thoroughly stifled. It is important to note that blockchain is the next generation of the 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 opportunity, the U.S. is likely to hand over the next larger wave of technology to others.

From an investment perspective, the landscape in other parts of the world is more fragmented, and going to Europe means facing dual regulatory challenges from the EU and its member states, along with geopolitical risks. So for us, this is a very real threat. I remember during a live broadcast or online seminar, I bluntly stated, "Chairman Gensler is a menace to innovation." After saying that, I realized we are a SEC-regulated institution; would this lead them to retaliate against us? After all, there were indeed some retaliatory regulatory actions during that time. But we decided we had to speak out because this is not just about us; it concerns the future of all American tech companies, even if it involves some risk.

Jen: Has the SEC ever approached you because of your comments?

Cathie Wood: No, we have not received any direct feedback. Of course, like all investment institutions, the SEC regularly audits us. Especially since we operate very transparently, for example, we were the first institution to publish research for free on social media, publicly share trading records daily, and maintain high transparency in our portfolios. Mutual funds do not do this because it brings more SEC scrutiny risks. But we have long known that we would be frequently audited, so we must ensure compliance is impeccable.

Our Chief Compliance Officer previously served as an examiner at the SEC for four years, and we have always held ourselves to that standard. I am not sure if the SEC feels more at ease with us because they never clearly tell you whether the audit is over or if everything is normal; if you don't receive a response, that is considered good news. But I believe we have undergone enough comprehensive or partial audits for them to know that we are "more compliant than saints."

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

Jen: Cathie, you share a lot of information on social media, including trading records, which are publicly accessible. This is quite different from many competitors. Why is transparency so important to you, and how has it become a core part of your identity?

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

When I truly understood the mechanics of ETFs, I immediately thought, "Why can't we put active funds into the ETF structure?" So, I voluntarily pushed this project at my previous company, which had already obtained an SEC exemption. At that time, I realized two things: first, this would disrupt mutual funds because ETFs have lower fees; second, ETFs are more transparent in every way. The crisis of 2008 and 2009 caused investors to lose trust in the financial system, and they wanted to be in sync with fund managers, which we could fulfill.

Today, many asset management companies are either going fully passive or becoming "highly benchmark-sensitive," resulting in nearly identical holdings across the board, such as heavy concentrations in a few large tech stocks (the Mag 6). We are not like that; our goal is to provide investors with exposure to future-oriented operations. In technological transformations, some giants will be disrupted, while others will adapt, but we will allocate our largest positions to "pure disruptors."

From 2021 to early 2024, although the market was in a bull phase, the gains were concentrated in a few stocks, especially the Mag 6, and we said this was not a healthy bull market. A healthy bull market would spread to more companies, which is exactly what started to happen this year.

To return to your question, we insist on this model because transparency is a genuine market demand. In 2020, we did not anticipate that this approach would have such a significant impact. The pandemic lockdowns kept global investors at home, and their only options were online shopping or online investing. We publicly shared our research and trading records daily, resulting in countless videos interpreting our trades on YouTube, especially in Asia, which unexpectedly helped us grow into a global brand.

In the early days of the pandemic, my economics background allowed me to quickly form a clear judgment: massive monetary and fiscal stimulus, soaring savings rates (which peaked at 27%, now only 4-5%), combined with supply chain disruptions, created a recipe for economic prosperity and volatility. And indeed, the results reflected this, with supply constraints, rising inflation, and aggressive rate hikes from the Fed putting immense pressure on innovative companies outside the Mag 6. Nevertheless, our openness and transparency allowed investors to understand our logic and walk alongside us.

12. Will AI Surpass ARK?

Jen: We don't have much time left, and I have two more questions. Returning to those future-oriented thoughts, given your extensive research on AI, do you worry that AI might one day surpass ARK in investment?

Cathie Wood: I would look at it from two angles. The areas where AI is most likely to replace are passive investing and "benchmark-sensitive" strategies, as these strategies are highly standardized, with many investors chasing the safety of the Mag 6. Quantitative strategies (Quant) segment the market based on historical factor analysis—growth, quality, volatility, profitability, etc.—but a significant portion of our strategy is marked as "Residual (unexplainable)" in their models because the future will not resemble the past, and quant relies on the past.

So, I believe quant will be completely commoditized by AI. Our strategy, however, relies on original research, and we even proactively share our research findings with AI, such as OpenAI, Grok, and other large models, allowing them to assist us in pattern recognition and efficiency improvements, especially in the application of Wright's Law. Wright's Law is similar to Moore's Law, but it predicts cost reductions based on output rather than time. We use it to forecast the cost curves of technology, a process that is very time-consuming, but AI can significantly accelerate this type of work. 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 want to conclude 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 are still unsure about your future direction in college, try anything that interests you. I have found that whether it's myself or colleagues who have joined our company, if you immerse yourself in a field you love and are willing to learn, life will be enjoyable. While it won't be completely stress-free, it will be worthwhile overall.

I am very passionate about my current work. Everything happening today in the field of innovation has sown seeds in the first 20 years of my career, and I have been fortunate to witness them sprout and grow. In the late 1990s, capital flooded into the internet, biotechnology, and other fields, and we knew that the technology was not yet ready for scaling; the costs were too high. For example, the first human genome sequencing completed in 2003 cost $2.7 billion, whereas today it only costs $200. Ironically, this most promising sector is currently performing the worst in the market, reflecting investor sentiment. When making money is easy, it often indicates a bubble; when everyone is worried and overlooking the most important opportunities, it is often the beginning of a healthy bull market.

Moreover, this bull market is spreading to more sectors, and we are pleased that blockchain is among them, allowing the traditional financial system to engage more with this new asset class, which is truly important.

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