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In their latest annual research report titled ‘Big Ideas 2024,’ ARK Invest, a renowned investment management firm, has put forth a compelling case for including Bitcoin in institutional portfolios. Drawing upon an extensive analysis of the crypto’s performance, the report recommends a significant allocation of “19.4%” to Bitcoin.
This figure is not arbitrary but is underpinned by a thorough evaluation of Bitcoin’s historical performance compared to major traditional investment assets.
ARK Invest Dive Into Bitcoin’s Long-Term Success and Value
Over seven years, Bitcoin has demonstrated an annualized return of 44%, starkly outperforming other major assets, which averaged a mere 5.7%, according to the investment management firm
BTC annualized returns compared to major asset classes. | Source: Ark Invest
ARK Invest’s report further delves into the nuances of Bitcoin’s investment potential, highlighting its performance since its inception. This includes a closer look at its track record over the past three years, marked by significant technological advancements and increased mainstream acceptance.
The report underscores investors with a long-term perspective have been the greatest beneficiaries of BTC’s growth despite its ‘notorious’ short-term volatility. According to ARK, the critical question for investors should be not about the timing of their investment in BTC but rather the duration for which they hold it.
Ark’s compiled historical data reveals that a holding period of at least five years has invariably led to profits, regardless of the purchase timing. The Investment management firm noted:
Instead of ‘when,’ the better question is ‘for how long?’ Historically, investors who bought and held bitcoin for at least 5 years have profited, no matter when they made their purchases.
ARK’s report also goes beyond mere investment recommendations. It hypothesizes the potential impact of institutional investments in BTC globally, considering the $250 trillion worth of global investable assets.
The implications of a modest investment from this pool into BTC are quite intriguing. For instance, according to Ark Invest, if just 1% of these global assets were allocated to BTC, its price could skyrocket to $120,000.
BTC price based on hypothetical impact from institutional investors. | Source: Ark Invest
Taking it a step further, if institutions were to align with ARK’s suggested allocation of 19.4%, the valuation of BTC could reach roughly $2.3 million per BTC. This substantial allocation recommendation reflects a significant shift from past years.
ARK’s analysis further indicates that “optimal Bitcoin allocation” has increased since 2015. Initially, a mere 0.5% allocation was deemed ideal for maximizing risk-adjusted returns over a five-year horizon. This figure has progressively increased, averaging 4.8% over time and peaking at 19.4% in 2023 alone.
Bitcoin’s Current State: Recovery Signs Amid Market Volatility
Meanwhile, BTC’s value stands significantly lower than these hypothetical figures, trading above $42,000. However, its recent performance indicates a recovery trajectory, showing a 6.1% increase in the past week following a significant plunge last week.
This resurgence aligns with Glassnode’s data, which points to a rise in stablecoin supply, enhancing their purchasing power to acquire BTC.
The declining stablecoin supply ratio (SSR) oscillator further corroborates this trend, indicating a favorable market condition for BTC acquisition.
As we saw last week with the rotation of stablecoins moving into #Bitcoin, that sent BTC above 42k.
Stablecoin supply is now 10B higher from the low,
and 3.5% higher in the past 30 days. https://t.co/QIq2sEA9yg pic.twitter.com/YFcSzZhan8
— James Van Straten (@jvs_btc) January 31, 2024
Featured image from Unsplash, Chart from TradingView
