Big Ideas 2024 | Bitcoin optimal allocation at 19.4%, potential target price $2.3 million

Ark Invest, a fintech investment firm, mentioned in its annual report "BIG IDEAS 2024" an analysis of various fields such as AI, Bitcoin, public chains, electric vehicles, robots, 3D printing, etc. Below is a summary of the section on Bitcoin.

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Chapter 3: Asset Allocation of Bitcoin

This chapter mainly discusses how much capital investors should allocate to Bitcoin while ensuring risk control and maximizing returns.

In addition, Ark mentioned that if about 19% of the globally investable assets were allocated to Bitcoin, the price of Bitcoin could reach $2.3 million.

Bitcoin Outperforms All Mainstream Assets in the "Long Cycle Time Frame"

Ark analyzed the performance of assets such as gold, commodities, real estate, bonds, stocks, and emerging markets in recent years, pointing out that Bitcoin has outperformed all mainstream assets in terms of annualized returns over a long period.

However, this statement may seem unfair to mainstream assets as they have a long history and their volatility has already smoothed out. Looking at the past three years, the average annual growth rate of Bitcoin is slightly lower than that of commodities.

Bitcoin's Correlation with Traditional Finance Remains Low

Despite the introduction of Bitcoin futures and spot ETFs, it seems that Bitcoin has not been fully embraced by traditional finance.

Ark pointed out that Bitcoin's correlation with traditional asset classes is relatively low at 0.27, but even lower than that of gold and commodities.

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Optimal Allocation of Bitcoin: 19.4%

Based on the principle of maximizing returns while adjusting for risk and setting a 5-year investment period, Ark indicated that the allocation should be as follows:

• Gold: 40.7%

• Stocks: 30.2%

• Bitcoin: 19.4%

• Commodities: 9.6%

How Bitcoin Could Reach $2.3 Million?

Ark previously predicted that Bitcoin could reach $258,500 to $1.48 million by 2030 under different market conditions.

Big Ideas 2023｜Ark Investments: Bitcoin Price to Range $250,000 to $1.48 Million by 2030, Depending on Market Trends

This year, Ark divided the $250 trillion of globally investable assets and its impact on Bitcoin's price based on different allocations:

• 1% allocation: $120,000

• 4.8% allocation: $550,000

• 19.4% allocation: $2.3 million

Chapter 4: Bitcoin in 2023

Ark recounts how Bitcoin revived amidst numerous bearish factors in 2022 and demonstrated resilience as a safe-haven asset in 2023, also mentioning the changes brought by the launch of Bitcoin spot ETFs.

Bitcoin Surges 155% in 2023

This chapter starts with Bitcoin's full-year trend in 2023 and highlights major events, from the Silicon Valley bank crisis at the beginning of the year to Binance founder Zhao Changpeng CZ stepping down as CEO at the end of the year.

The surge in Bitcoin's price also pushed the total market capitalization of cryptocurrencies to $827 billion.

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Ark's Reliable Indicator: On-Chain Market Mean

The report mentions that Ark has always used the on-chain market mean as a primary indicator to identify Bitcoin's uptrends and downtrends, which has been a reliable boundary. Looking at past trends, when the price of Bitcoin is higher than the on-chain market mean, it is usually the early stage of a bull market.

Bitcoin as a Safe Haven Asset

During the U.S. bank crisis in March last year, the U.S. KBW Bank Index plummeted, while Bitcoin quickly surged, rising over 40% by May, emphasizing its role as a risk hedge asset.

Four Catalysts for Bitcoin in 2024

1. Bitcoin Halving: Expected inflation rate to decrease from 1.8% to 0.9%.

2. Institutional Adoption: BlackRock CEO Larry Fink significantly changes his view on Bitcoin.

3. Bitcoin Spot ETF: Further reduces the learning curve for investing in BTC and lowers operational complexity.

4. Regulatory Developments: Bankruptcies of Celsius, FTX, and others drive regulatory progress, including the implementation of the EU's MiCA legislation.

Ark's annual forecast report holds certain reference value, especially as the founder is bullish on Bitcoin in the long term, and the research team has in-depth knowledge of Bitcoin. The advantages of Bitcoin listed in the report, such as scarcity, security, and globalization, are quite convincing. However, some predictions and positions in the report should be scrutinized, especially as Ark is one of the institutions issuing Bitcoin spot ETFs, and looking back at Ark's past forecasts, the optimism towards Bitcoin has often been excessive.

Ark Investments: Bitcoin Price to Exceed $1.5 Million by 2030 After the Approval of Bitcoin Spot ETF