Cathie Wood: Reaganomics 2.0 Could Boost Bitcoin as Diversifier

Cathie Wood’s central macroeconomic thesis, detailed in her January 15 “New Year letter,” posits that the underlying US economy has suffered a “rolling recession” rather than broad-based weakness. She argues that the Federal Reserve’s aggressive rate hikes, which saw the Fed funds rate surge 22-fold from 0.25% in March 2022 to 5.5% by July 2023, pushed specific rate-sensitive sectors into recession sequentially. Wood anchors this with housing data, noting existing home sales fell 40% from a 5.9 million annual rate in January 2021 to 3.5 million in October 2023—a level last seen in late 2010.

Wood contends this rolling weakness has created a “coiled spring” poised for a powerful rebound, driven by a confluence of policy changes. She points to deregulation, led in the AI and crypto spaces by the first AI and Crypto Czar, David Sacks, and significant tax relief. She projects that lower taxes on tips, overtime, and social security could hand consumers significant refunds, potentially driving real disposable income growth from approximately 2% to 8.3% in a single quarter. For corporations, she argues that making accelerated depreciation for equipment, software, and R&D permanent and retroactive could push the effective corporate tax rate “down toward 10%,” unleashing cash flow and investment.

Wood builds a concrete case for falling inflation, citing specific component declines. She notes oil prices were down roughly 53% from a March 2022 peak and 22% year-over-year as of ARK’s January 12 data. Single-family home sale prices, she adds, are down about 15% from an October 2022 peak, with existing home price inflation decelerating from roughly 24% year-over-year in mid-2021 to about 1.3%. On labor costs, she cites a modest 1.2% unit labor cost inflation figure, supported by productivity gains.

This disinflationary backdrop is key to her argument about gold and Bitcoin. Wood observes that in 2025, the gold price appreciated 65% while Bitcoin slipped 6%. She suggests gold’s 166% surge since October 2022 may be less about inflation fears and more about global wealth creation outpacing gold’s roughly 1.8% annual supply growth. For Bitcoin, she emphasizes its “mathematically metered” supply, scheduled to rise about 0.82% annually for two years before slowing. This, she argues, makes diversification—not the “digital gold” analogy—the cleaner lens through which to view Bitcoin’s allocation case.

ARK’s correlation analysis, using weekly returns from January 2020 through January 6, 2026, supports this. Bitcoin showed a minimal 0.14 correlation to gold, a near-zero 0.06 correlation to bonds, and a modest 0.28 correlation to the S&P 500. Notably, the S&P 500’s correlation to bonds was higher, at 0.27. This data underpins Wood’s view that Bitcoin’s low cross-asset correlation is a more durable investment thesis than any direct comparison to bullion.

Wood ties her outlook directly to currency markets, forecasting a stronger US dollar (DXY). After a year where the DXY fell 11% in the first half and 9% for the full year, she argues that higher US returns on invested capital—driven by her projected fiscal stimulus, deregulation, and US-led tech breakthroughs—could push the dollar higher. She draws a direct parallel to the early Reagan era, when “the dollar nearly doubled.”

The near-term market implication of this “Reaganomics on steroids” regime, Wood suggests, is less about a specific Bitcoin price target and more about portfolio positioning. She envisions a landscape of falling inflation, lower interest rates, and heavy AI capital expenditure, citing data-center systems investment rising 47% to nearly $500 billion in 2025, with a further 20% increase expected in 2026. In this environment, allocators may revisit where Bitcoin sits on the risk spectrum. While her 2026 outlook does not publish a new BTC target, ARK Invest has previously outlined 2030 scenarios ranging from roughly $300,000 to $1.2 million. At the time of her analysis, BTC traded at $95,685.

Ultimately, Cathie Wood’s thesis reframes Bitcoin not as a mere hedge akin to gold, but as a strategic diversifier uniquely positioned for a potential new macro regime. By weaving crypto into a narrative of US policy revival and productivity gains, she challenges investors to look beyond simplistic narratives and consider Bitcoin’s statistical role in a portfolio undergoing profound change.