Cathie Wood’s asset management firm Ark Invest has predicted that the price of Bitcoin (BTC) could soar to $2.3 million if institutions allocated a substantial portion of their investable asset base to it.
The asset manager made the prediction in its research report named Big Ideas 2024, explaining the hypothetical impact that institutional investments and allocations from the global $250 trillion investable asset base would have on BTC’s price.
Bitcoin Could Be Worth $2.3M
According to Ark Invest’s analysis, a portfolio seeking to maximize risk-adjusted returns on a five-year timeframe from 2015 would have allocated 0.5% to BTC. Since then, on the same basis, the average allocation to the digital asset 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 push BTC to $120,000. Allocating a 4.8% average maximum Sharpe ratio from 2015 to 2023 could cause BTC to soar to $550,000, and the asset could skyrocket to $2.3 million following the 19.4% allocation in 2023.
“Bitcoin’s volatility can obfuscate its long-term returns. While significant appreciation or depreciation can occur over the short term, a long term investment horizon has been key to investing in bitcoin. Instead of “when,” the better question is, “For how long?” Historically, investors who bought and held bitcoin for at least 5 years have profited, no matter when they made their purchases,” said the asset manager.
BTC Worthy of Strategic Allocation: Ark
On the other hand, the optimal portfolio allocation targets for assets like gold, commodities, bonds, and equities in 2023, on 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 a “strategic allocation in institutional portfolios,” as the cryptocurrency’s price movements have not correlated highly to those of other asset classes.
In the past five years, the correlation of BTC’s returns relative to traditional asset classes has averaged only 0.27, while the digital currency’s annualized return has averaged approximately 44% in the last seven years, compared to 5.7% from other major assets.
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