Mentioned Companies: MSTR, SQ, TSLA, U

#258: Tesla Adds Bitcoin to Its Balance Sheet, & More

February 16, 2021
Written by: ARK Invest

1. Tesla Adds Bitcoin to Its Balance Sheet

This week, bitcoin soared to an all-time high after Tesla announced that it would invest 8% of its cash – $1.5 billion – into the cryptocurrency. Tesla also announced that it would start accepting bitcoin as payment for its products and services.

Microstrategy, Square, and now Tesla are showing public companies the way to add bitcoin as a legitimate alternative to cash on their balance sheets. As noted in ARK’s Big Ideas 2021, we believe bitcoin will serve as an alternative to fiat cash. As a thriving company with no prior affiliation to bitcoin, Tesla could catalyze a new wave of corporations considering the diversification of cash into bitcoin.

According to ARK’s research, if all companies in the S&P 500 were to diversify 1% of their cash balances into bitcoin, its price would double from nearly $40,000 today to almost $80,000, while a 10% allocation would add $400,000.


2. Game Engines Are Democratizing the Creation of Video Games

In virtual worlds, game engines govern what can and cannot happen in video games. Building the foundational software for virtual worlds is tedious, strenuous, time-consuming, and expensive, explaining why our research has found only a few companies like Unity Software and Epic Games have developed engines-as-a-service. Company X, for example, wants to build a first-person shooter game but does not want to spend the time and money necessary to write code on the trajectory of bullets. Instead, it signs up for Epic’s Unreal Engine, visits the marketplace, and downloads code – Multiplayer Projectile Physics Plugin.

Video game development is likely to become as easy as video editing and photoshopping. As game engines lower the friction involved in creating games, we believe more developers will enter the market and, in a virtuous cycle, they will strip even more friction from game creation. Look no further than Epic Game’s latest developer tool, MetaHumans, which allows anyone to create digital characters.

During the last 50 years, video games have evolved from pixelated non-customizable avatars to life-like high fidelity programmable ‘Metahumans.’ Now with game engines, we wonder how video games will evolve during the next 50 years.


3. Cancer Screening Trials Should Incorporate Hereditary Cancer Tests

In Big Ideas 2021, we described how a combination of diagnostic tests could improve cancer care. While most genomic tests are focused on cancer patients today, the combination of tests for hereditary cancer with liquid biopsies for cancer screening could improve the prevention of cancer meaningfully.

Historically, cancer screening has focused on individuals with risk factors that increase the likelihood of cancer. All else equal, for example, a person over the age of 50 with a history of smoking has benefited more from screening than has a younger non-smoker. Among early measures of cancer risk, age, smoking status, and family history have contributed to risk prediction models (RPMs).

Genetic risk is a powerful predictor of cancer. By integrating genetic risk factors with traditional risk factors, sophisticated RPMs could focus cancer screening on higher risk individuals. Several RPMs developed recently incorporate monogenic cancer risk factors including dangerous – though rare – mutations in highly important genes like TP53.

Alternatively, diagnosticians can compute polygenic risk scores (PRSs) by measuring thousands of small, benign mutations scattered across many genes. According to several recent studies, when combined with monogenic risk assessments, PRSs can highlight an individual’s risk of developing certain cancers. Unlike monogenic risks, PRSs can be computed for anyone in a given population.

In our view, cancer screening programs should target high-risk individuals, as defined by RPMs that integrate familial, clinical, and polygenic risk data. Screening high-risk cohorts should lower the risk of overtreatment and increase the positive predictive value (PPV) of testing—two key measures of the effectiveness of cancer screening.

We believe companies seeking to commercialize either single-cancer or multi-cancer screening tests should incorporate hereditary cancer risk data. Today, no company seems to have the infrastructure, expertise, and intellectual property to run a trial involving both screening and polygenic risk assessment. Partnerships could be the answer to this unmet need.

Finally, we would like to highlight the barriers to widespread adoption of polygenic risk scores. Chief among them, the predictive ability of PRS’s is not equal for all ethnicities, highlighting the urgent need for more diverse, population-scale genomics studies.

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