Best Allocation for Bitcoin in 2024: 19.4% Yields Potential Target Price of $2.3 Million
Ark Invest mentioned in its annual report “BIG IDEAS 2024” an analysis of various areas including AI, Bitcoin, public chains, electric vehicles, robots, and 3D printing. The following is a summary of the Bitcoin section.
Chapter 3: Bitcoin Asset Allocation
Bitcoin surpasses all mainstream assets in the “long-term time frame”
Low correlation between Bitcoin and traditional finance
Optimal allocation of Bitcoin: 19.4%
How will Bitcoin reach $2.3 million?
Chapter 4: Bitcoin in 2023
Bitcoin rose 155% in 2023
Ark’s reliable indicator: on-chain market mean
Bitcoin as a risk hedge
Four catalysts for Bitcoin in 2024
Chapter 3: Bitcoin Asset Allocation
This chapter discusses how much capital investors should allocate to Bitcoin under the premise of risk control and maximizing returns. Ark also mentioned that if approximately 19% of global investable assets are invested in Bitcoin, it will reach $2.3 million.
Bitcoin surpasses all mainstream assets in the “long-term time frame”
Ark analyzed the performance of assets such as gold, commodities, real estate, bonds, stocks, and emerging markets in recent years, and concluded that Bitcoin has outperformed all mainstream assets in terms of long-term annual returns.
Low correlation between Bitcoin and traditional finance
Despite the emergence of Bitcoin futures and spot ETFs, Bitcoin has not yet been completely “tamed” by traditional finance. Ark pointed out that Bitcoin has a correlation of 0.27 compared to traditional asset classes, but gold and commodities have an even lower correlation.
Asset Class Correlation
Optimal allocation of Bitcoin: 19.4%
Based on risk-adjusted returns and a 5-year investment period, Ark suggests the following allocation:
Gold: 40.7%
Stocks: 30.2%
Bitcoin: 19.4%
Commodities: 9.6%
How will Bitcoin reach $2.3 million?
Last year, Ark made predictions for different market environments, stating that Bitcoin will reach $258,500 to $1.48 million by 2030. This year, Ark used the “global investable assets” of $250 trillion to calculate the impact on Bitcoin’s price based on different allocation percentages:
1% allocation: $120,000
4.8% allocation: $550,000
19.4% allocation: $2.3 million
Chapter 4: Bitcoin in 2023
Ark detailed how Bitcoin recovered amidst negative factors in 2022, and its resilience as a safe haven asset in 2023, as well as the impact of the introduction of Bitcoin spot ETFs.
Bitcoin rose 155% in 2023
This chapter starts with the full-year trend of Bitcoin in 2023, marking significant events such as the Silicon Valley Bank crisis at the beginning of the year and the resignation of CZ, the founder of Binance, as CEO at the end of the year. Bitcoin’s surge also pushed the total market capitalization of cryptocurrencies to $827 billion.
Ark’s reliable indicator: on-chain market mean
The report mentions that Ark has always used the on-chain market mean as a reliable indicator to identify Bitcoin’s upward and downward trends. It is observed that when the Bitcoin price is higher than the on-chain market mean, it is usually the early stage of a bull market.
Bitcoin as a risk hedge
During the bank crisis in the United States in March of last year, the KBW Bank Index plummeted while Bitcoin quickly surged, rising over 40% by May. This highlights its role as a risk hedge asset.
Four catalysts for Bitcoin in 2024
Bitcoin halving: Expected inflation rate decreases from 1.8% to 0.9%.
Institutional adoption: BlackRock CEO Larry Fink’s significant change in attitude towards Bitcoin.
Bitcoin spot ETF: Reducing the learning curve and complexity of investing in BTC.
Regulatory developments: Bankruptcies of Celsius, FTX, and others driving regulatory developments, including the implementation of the EU MiCA law.
Ark’s annual report has certain reference value, especially considering the founder’s long-term optimism towards Bitcoin and the team’s in-depth research on Bitcoin. The advantages of Bitcoin listed in the report, such as scarcity, security, and globalization, are persuasive. However, some of the predictions and positions in the report should be verified, especially considering that Ark is one of the issuers of Bitcoin spot ETFs, and looking back at Ark’s previous predictions, their optimism towards Bitcoin’s growth has always been excessive.
Big Ideas 2024
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