9 months ago
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An optimal allocation of $250 trillion, equivalent to over 19% of global assets, to Bitcoin, could send its price to $2.3 million, ARK Invest suggests in a report published today.
The report, titled ‘Big Ideas 2024,’ examines the impact of technology on industries and economies worldwide and the confluence of technology and connectivity. It covers a wide range of subjects, including Bitcoin’s role in investment portfolios and the potential catalysts for Bitcoin’s price actions in 2024.
According to ARK Invest’s projections, an increased allocation of global assets to Bitcoin could have positive implications for its price. ARK Invest estimates that Bitcoin’s price could reach $120,000 if 1% of global assets is allocated to it.
Based on a rolling 5-year time horizon, Bitcoin could rally to $550,000 at an allocation of 4.8%, the average maximum Sharpe Ratio from 2015-2023. The most ambitious scenario is a 19.4% allocation, which could significantly increase Bitcoin’s price to around $2.3 million.
According to ARK Invest, the optimal allocation for a Bitcoin portfolio in 2023 is suggested to be 19.4%. Falling below this allocation may result in suboptimal returns, while exceeding it could expose you to unnecessary risks.
The research also shows that Bitcoin has outperformed all major asset classes, like gold, equities, or real estate, in long-term investment returns. Bitcoin’s compound annual growth rate (CAGR) stands at 44%, dwarfing the average asset class CAGR of 5.7%.
CARG is a metric that calculates how much an investment grows on average each year when you reinvest the profits. It takes the total return of an investment over several years and gives a single average rate. It is commonly used to assess and predict the expected return of a portfolio or asset class over a designated timeframe, often looking at a period of five years.
Highlighting the long-term viability of Bitcoin investments, ARK Invest points out that long-term Bitcoin holdings have paid off, regardless of Bitcoin’s volatility.
“Bitcoin’s volatility can obfuscate its long-term returns. While significant appreciation or depreciation can occur over the short term, a long-term investment horizon has been key to investing in bitcoin,” the research noted. “Historically, investors who bought and held bitcoin for at least 5 years have profited, no matter when they made their purchases.”
Additionally, ARK Invest outlines four key catalysts that could influence Bitcoin’s trajectory this year, including spot Bitcoin ETF launches, Bitcoin halving, institutional adoption, and regulatory developments. According to the study, previous halving events have triggered bull markets, which suggests the upcoming halving could have a comparable impact.
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