April 19, 2024
Changing financial tides: ARK Invest suggests 19.4% Bitcoin allocation plan for optimal returns


In its latest annual research report titled ‘Big Ideas 2024’, renowned investment management firm ARK Invest has put forward a compelling case for the inclusion of Bitcoin in institutional portfolios. Based on a comprehensive analysis of the crypto’s performance, the report recommends a significant allocation of “19.4%” to Bitcoin.

This figure is not arbitrary but is based on a thorough assessment of Bitcoin’s historical performance compared to major traditional investment assets.

ARK Invest dives into Bitcoin’s long-term success and value

Over seven years, Bitcoin has displayed an annualized return of 44%, outperforming other major assets which have averaged just 5.7%, according to the investment management firm.

BTC’s annual returns compared to major asset classes. , Source: Ark Invest

ARK Invest’s report sheds light on the nuances of Bitcoin’s investment potential, highlighting its performance since its inception. This involves taking a closer look at its track record over the past three years, which has been marked by significant technological advances and increased mainstream acceptance.

The report emphasizes that investors with a long-term perspective have been the biggest beneficiaries of BTC’s growth despite its ‘notorious’ short-term volatility. According to ARK, the important question for investors should not be about the timing of their investment in BTC but about the period for which they hold it.

Arch’s compiled historical data shows that regardless of the timing of purchase, a holding period of at least five years has always generated profits. The investment management firm noted:

Instead of ‘when’, the better question is ‘for how long?’ Historically, investors who bought Bitcoin and held it for at least 5 years have profited, no matter when they made the purchase.

ARK’s reports go beyond mere investment recommendations. It envisages the potential impact of institutional investment in BTC globally, considering $250 trillion worth of global investable assets.

The implications of a modest investment in BTC from this pool are quite interesting. For example, according to Ark Invest, if just 1% of these global assets were allocated to BTC, its price could rise to $120,000.

The price of BTC is based on the hypothetical influence of institutional investors. , Source: Ark Invest

Taking this a step further, if institutions align with ARK’s suggested allocation of 19.4%, BTC’s valuation could reach approximately $2.3 million per BTC. This substantial allocation recommendation marks a significant change from previous years.

ARK’s analysis further shows that the “optimal Bitcoin allocation” has increased since 2015. Initially, only a 0.5% allocation was considered ideal for maximizing risk-adjusted returns over a five-year horizon. This figure increased progressively, averaging 4.8% over time and reaching 19.4% in 2023 alone.

Current state of Bitcoin: Signs of recovery amid market volatility

Meanwhile, BTC’s value is well below these hypothetical figures, and is trading above $42,000. However, its recent performance indicates a recovery trajectory, showing a 6.1% rise over the past week after a significant decline last week.

The price of BTC is moving sideways on the 4-hour chart. Source: BTC/USDT on tradingview.com

This resurgence aligns with data from Glassnode, which points to an increase in stablecoin supply, increasing their purchasing power to acquire BTC.

The falling stablecoin supply ratio (SSR) oscillator further reinforces this trend, indicating favorable market conditions for BTC acquisitions.

Featured image from Unsplash, chart from TradingView

Source: bitcoinist.com



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