Cathie Wood’s asset management powerhouse, Ark Invest, has presented a bold prediction suggesting that Bitcoin’s (BTC) value could reach an astonishing $2.3 million, provided that institutional players allocate a significant portion of their investable assets to it.
In its latest research report, titled Big Ideas 2024, the asset management firm delves into the hypothetical scenario where institutional investments and allocations from the global $250 trillion investable asset base could dramatically impact BTC’s market value.
Potential Bitcoin Valuation at $2.3 Million Ark Invest’s analysis suggests that a portfolio seeking to optimize risk-adjusted returns over a five-year period, starting from 2015, would have allocated 0.5% to BTC. Subsequently, the average allocation to the digital asset on the same basis has increased to 4.8%, and in 2023 alone, such portfolios would have allocated a substantial 19.4%.
According to the analysis, a mere 1% allocation from the $250 trillion global investable asset base could propel BTC to $120,000. Further, allocating the average maximum Sharpe ratio of 4.8% from 2015 to 2023 might catapult BTC to $550,000, with an even more optimistic scenario of the asset skyrocketing to $2.3 million following the 19.4% allocation in 2023.
“Bitcoin’s volatility can mask its long-term returns. Despite significant short-term fluctuations, a prolonged investment horizon has proven crucial for bitcoin investments. Rather than asking ‘when,’ the more pertinent question is ‘for how long?’ Historically, investors who adopted a buy-and-hold strategy for at least 5 years have consistently profited, regardless of the timing of their purchases,” emphasized the asset manager.
Strategic Allocation Warranted: Ark Contrary to traditional assets like gold, commodities, bonds, and equities, which have optimal portfolio allocation targets of 40.7%, 9.6%, 0%, and 30.3%, respectively, in 2023, on a five-year time horizon similar to BTC, Ark Invest insists that bitcoin has evolved into an independent asset class deserving of a “strategic allocation in institutional portfolios.” This endorsement is based on the cryptocurrency’s relatively low correlation with other asset classes, averaging only 0.27 in the past five years, and its impressive annualized return of approximately 44% over the last seven years, in contrast to the 5.7% from other major assets.
