1 Top Cryptocurrency to Buy Before It Surges 4,500%, According to Cathie Wood's Ark Invest

Cathie Wood and her team at Ark Invest focus exclusively on disruptive technology. And one of the biggest disruptive factors of the last 15 years Bitcoin (BTC 0.12%) and the idea of ​​a blockchain.

Bitcoin opened the door for developers to create numerous cryptocurrencies with different uses. However, Wood and her team believe there is still a lot to like about the original cryptocurrency. They see several catalysts that could push the price of Bitcoin higher.

The biggest factor that could drive the price of Bitcoin higher in 2024 is adoption by institutional investors. Ark estimates that if the $250 trillion in global investable assets provided an optimal amount for Bitcoin, the price of the cryptocurrency would rise to $2.3 million. That's a 4,500% increase from today's price, about $52,000.

Bitcoin belongs in every portfolio, says Cathie Wood

Bitcoin has proven to be a good diversifying asset for investors in recent years. It has a moderate price correlation with stocks and an even lower correlation with other asset classes. In other words, the price of Bitcoin is not closely linked to the price fluctuations of other assets such as stocks or bonds. Therefore, Ark Invest argues, it belongs in investment portfolios to maximize risk-adjusted returns.

Analysts at Ark found that the optimal exposure to Bitcoin in 2023 to maximize risk-adjusted returns would have been 19.4% of a portfolio. If this percentage of all investable assets in the world flowed into Bitcoin, the cryptocurrency would have a market cap of around $48.5 trillion. The current market capitalization is around $1 trillion. Taking into account the slower increase in Bitcoin supply due to continued mining, the price comes to $2.3 million.

It is important to note that Ark's optimal portfolio allocations may be somewhat biased because they are retrospective. While it can be valuable to look to the past to get an idea of ​​historical norms, investors should also consider whether the past is a good reflection of the future based on the current state of financial markets and other macroeconomic factors. After a 150% surge in 2023, Bitcoin may no longer offer the same risk-reward profile as it did at the start of last year.

Ark offers some more sensible global asset allocations for Bitcoin. The average optimal allocation for Bitcoin at the start of each year since 2013 is 4.8%. If investment managers aim for this number, the price of Bitcoin is likely to rise to around $550,000. If investors invest just 1% of their portfolio in Bitcoin, Ark expects the price to rise to $120,000, which is still more than double today's price.

Importantly, it is now easier than ever for institutional investors to gain exposure to Bitcoin. The launch of spot Bitcoin exchange-traded funds (ETF) in January, including Ark Ark 21Shares Bitcoin ETF (ARKB -1.86%)offers an easy way to manage Bitcoin in a portfolio. It could also open the door for investors to gain exposure to retirement accounts such as IRAs and 401(k)s.

This could be just one of several key catalysts driving demand for the cryptocurrency's limited supply.

Now is the time to buy Bitcoin

In addition to making Bitcoin easier to include in a portfolio via spot ETFs, Ark sees a few other reasons why we may be at the start of another Bitcoin bull market.

First, a technical indicator created by Ark called “On-Chain Market Mean” shows that the price of Bitcoin rose above the indicator’s threshold at the end of last year. Historically, a break above the on-chain market average was a sign of the early stages of a bull market.

Another catalyst is the halving later this year. The block reward paid to miners for successfully confirming a block is expected to increase from 6.25 Bitcoin to 3,125 Bitcoin in April. This will slow down the growth rate of Bitcoin supply. The last halving in May 2020 coincided with a bull market.

Ark Invest emphasizes the importance of maintaining a long-term perspective for Bitcoin investors. “Instead of 'when,' the better question is 'how long?'” they write. They point out that holding Bitcoin for at least five years has resulted in profits for every investor throughout history. However, Bitcoin is still trading below the highs it reached in 2021.

While Ark's price target of $2.3 million may be very aggressive, it is not unreasonable to expect Bitcoin to continue rising from here. With the catalysts of spot Bitcoin ETFs driving demand from a broader investor group and slower supply growth due to the upcoming halving, there could still be room for the current bull market to continue.

Adam Levy has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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