ARK Invest said that an optimal portfolio last year would have held 19.4% of Bitcoin and that such an allocation maximized the “portfolio’s risk-adjusted return.”
ARK said in its annual Big Ideas report for 2024 that Bitcoin is an important component of a diversified portfolio, noting that its five-year correlation with traditional asset classes is only 0.27. It said investing in Bitcoin is a hedge against traditional asset classes.
It added: “Bitcoin is not only a new investment option but also an important component of a diversified portfolio with unprecedented growth potential among digital assets.”
“Over the past seven years, Bitcoin’s annualized returns have far outpaced major asset classes.”
ARK Invest advocates a long-term investment strategy for Bitcoin. It said that Bitcoin's short-term volatility could "confound" the asset's long-term returns. Investors should focus not on when to buy Bitcoin, but on deciding how long they should hold the leading cryptocurrency.
It said investors who held bitcoin for at least five years "would have made a profit regardless of when they bought it."
ARK said that given the $250 trillion global investable asset base, changes in the way institutional investors allocate their portfolios could have a significant impact on the price of Bitcoin.
If this investor base allocates 4.8% of its assets to Bitcoin, ARK estimates that the Bitcoin price could soar to $550,000, and if the optimal allocation is 19.4%, the price could soar to $2.3 million. It says that allocating just 1% would push the price from $42,998 at 12:48 pm EST to $120,000.
The optimal allocation to Bitcoin could have an impact on the price of Bitcoin of more than $2 million.
Image credit: Yassine Elmandjra (@yassineARK) January 31, 2024
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