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The price of Bitcoin — the largest cryptocurrency by market value could blast to over $500,000 as financial institutions start adopting the cryptocurrency space, Ark Invest's Cathie Wood told CNBC in an interview on Thursday.

According to the billionaire investor, institutions are always digging into new investment opportunities that aren’t entitled to traditional asset classes such as stocks and bonds, and crypto could fill the gap.

"I think institutions are moving in [to crypto] right now," Wood said, adding that they currently prefer the two largest cryptocurrencies, bitcoin, and ether. As a whole, according to Wood, institutions barely have any exposure to the space.

"The reason institutions are moving in is to some extent this is a new asset class with correlations very different compared to other asset classes," Wood explained. A study conducted by Ark Invest found that the asset with the closest correlation to bitcoin is real estate.

Bitcoin has entered a bear market following the large stock market sell-off last week. The big sell-off followed fears about the Omicron covid new variant. This has countered the commonly held belief that cryptos are risk assets that move against the broader market. Bitcoin fell 30% last week and is trading around $50,000. 

"Institutional managers have to look at new asset classes that are evolving, that have low correlations, that's the key to diversification, and it's the holy grail in terms of asset allocation," Wood said. 

If institutions moved roughly 5% of their portfolio to bitcoin over time, Wood believes it would add $500,000 to the current price of bitcoin, to about $550,000 based on bitcoin's current price. That represents a potential upside of 1,000% from current levels.