Cathie Wood's asset management firm Ark Invest has predicted that the price of Bitcoin (BTC) could rise to $2.3 million if institutions put a significant portion of their investable assets into Bitcoin.
The asset manager made this prediction in its research report titled “Big Ideas 2024,” explaining the hypothetical impact that institutional investments and allocations from the $250 trillion global investable asset base would have on the price of BTC.
Bitcoin could be worth $2.3 million
According to Ark Invest's analysis, a portfolio seeking to maximize risk-adjusted returns over a five-year period starting in 2015 would have invested 0.5% in BTC. Since then, the average allocation to the digital asset on the same basis would have been 4.8%, while in 2023 alone such portfolios would have allocated 19.4%.
Based on the analysis, a 1% allocation from the $250 trillion global investable asset base could grow BTC to $120,000. Allocating an average maximum Sharpe Ratio of 4.8% from 2015 to 2023 could see BTC rise to $550,000, and the asset could reach $2.3 million in 2023 after allocating 19.4% -Dollars rise.
“Bitcoin’s volatility can obscure its long-term returns. While significant appreciation or devaluation can occur in the short term, a long-term investment horizon was key to investing in Bitcoin. Instead of “when,” the better question is, “How long?” “Historically, investors who bought Bitcoin and held it for at least five years, regardless of when they made their purchases, have benefited,” the asset manager said.
BTC worthy of strategic allocation: Ark
On the other hand, the optimal portfolio allocation targets for assets such as gold, commodities, bonds and stocks in 2023 over a five-year time horizon, just like BTC, are 40.7%, 9.6%, 0% and 30.3%, respectively.
Ark insisted that Bitcoin has become an independent asset class worthy of “strategic allocation in institutional portfolios” because the cryptocurrency’s price movements are not highly correlated with those of other asset classes.
Over the past five years, the correlation of BTC's returns compared to traditional asset classes has averaged just 0.27, while the digital currency's annual return over the past seven years has averaged about 44%, compared to 5.7% for other major ones assets.
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