ARK Invest’s latest report heralds Bitcoin as a dominant force in the investment world, advocating for a substantial 19.4% portfolio allocation.
The firm’s comprehensive analysis, detailed in its “Big Ideas 2024” report published on Jan. 31, highlights Bitcoin’s (BTC) impressive performance and potential future growth catalyzed by several key factors.
Central to ARK’s assessment is Bitcoin’s remarkable return rate. Over the past seven years, Bitcoin has yielded an average annual return of around 44%, starkly outperforming other major asset classes, averaging a return of 5.7%.
This exceptional performance is a pivotal reason behind ARK’s recommendation to allocate 19.4% of an investment portfolio to Bitcoin, a substantial increase from a mere 0.5% allocation observed in 2015.
Bitcoin’s resilience during market fluctuations is also a focal point in ARK’s report. The flagship cryptocurrency demonstrated notable growth, particularly during the early 2023 collapse of U.S. regional banks, where its price increased by more than 40%. The resilience not only highlights Bitcoin’s potential as a hedge against counterparty risk and cements its status as a reliable risk-off asset amidst macroeconomic uncertainties.
Looking ahead to 2024, ARK pinpoints several catalysts that could drive Bitcoin’s growth. The report emphasizes the importance of spot Bitcoin exchange-traded funds (ETFs) for bridging the gap between traditional investors and the cryptocurrency market. Additionally, the upcoming Bitcoin halving, expected in April 2024, is projected to be a bullish event for the cryptocurrency.
The BTC halving event, which historically aligns with the initiation of bull markets, will reduce Bitcoin’s inflation rate, potentially impacting its value.
ARK’s bullish stance is further supported by its projections on Bitcoin’s pricing with increased global allocation. The report suggests that even a 1% allocation from the $250 trillion global investable asset base could elevate Bitcoin’s price to $120,000. An ambitious 19.4% allocation could skyrocket its value to an astounding $2.3 million. These figures are grounded in Bitcoin’s low five-year correlation of 0.27 with traditional assets, popularizing its role as a diversifier in investment portfolios.
Lastly, the report indicates a shifting perception of Bitcoin among institutional investors. The transition from viewing Bitcoin as a speculative instrument to a strategic investment is gaining momentum. This shift is exemplified by changing attitudes of key figures in the finance sector, such as BlackRock CEO Larry Fink, who has begun to recognize Bitcoin’s potential as a “flight to quality.”
