cathie wood and his team at Ark Invest focus exclusively on disruptive technology. And one of the biggest disruptors of the last 15 years is bitcoin (btc 1.10%) and the idea of โโa block chain.
Bitcoin opened the door for developers to create numerous CRYPTOCURRENCIES with different degrees of usefulness. However, Wood and his team believe there is still a lot to like about the original cryptocurrency. They see several catalysts that could drive up the price of Bitcoin.
The most important factor that could drive up the price of Bitcoin in 2024 is adoption by institutional investors. Ark believes that if the $250 trillion in global investable assets were to allocate an optimal amount to Bitcoin, it would send the cryptocurrency's price to $2.3 million. That's a 4,500% increase from the current price, around $52,000.
Bitcoin belongs in every wallet, says Cathie Wood
Bitcoin has proven to be a good diversifying asset for investors in recent years. It shows moderate price correlation with stocks and even lower correlation with other asset classes. In other words, the price of Bitcoin is not closely related to the price fluctuations of other assets such as stocks or bonds. As such, Ark Invest maintains, it belongs in investment portfolios to maximize risk-adjusted returns.
Ark analysts found that the optimal Bitcoin exposure in 2023 to maximize risk-adjusted returns would have been 19.4% of a portfolio. If that percentage of all investable assets in the world flowed into Bitcoin, the The cryptocurrency would have a market capitalization. of around 48.5 billion dollars. Its current market capitalization is around $1 trillion. Taking into account the slow increase in Bitcoin supply due to continuous mining, you get a price of $2.3 million.
It is important to note that Ark's optimal portfolio allocations may be a bit biased as they are backward-looking. While it may be valuable to look to the past for insight into historical norms, investors should also consider whether the past is a good representation of the future based on the current state of financial markets and other macroeconomic factors. After rising 150% in 2023, Bitcoin may not offer the same risk/reward profile as it did early last year.
Ark offers some more reasonable global asset allocations for Bitcoin. The average optimal allocation for Bitcoin at the beginning of each year since 2013 is 4.8%. If investment managers target that figure, the price of Bitcoin should rise to around $550,000. If investors allocate just 1% of their portfolios to Bitcoin, Ark predicts the price will rise to $120,000, which is still more than double the current price.
Importantly, it is now easier than ever for institutional investors to add exposure to Bitcoin. The launch of the spot Bitcoin Exchange Traded Funds (ETF) in January, including Ark itself Ark 21Shares Bitcoin ETF (ARKB -1.86%), provides an easy way to manage Bitcoin in a wallet. It could also open the door for investors to add exposure in retirement accounts such as IRAs and 401(k).
That could be just one of several important catalysts to drive demand for the cryptocurrency's limited supply.
Now is the time to buy Bitcoin
In addition to the greater ease of adding Bitcoin to a portfolio via spot ETFs, Ark sees a couple more reasons why we may be at the start of another bull market for Bitcoin.
First, a technical indicator created by Ark called the on-chain market average shows that the price of Bitcoin rose above the indicator's threshold level late last year. Historically, beating the market average on chain has signaled the early stages of a bull market.
Another catalyst is the halving later this year. The block reward paid to miners to successfully confirm a block will go from 6.25 Bitcoin to 3.125 Bitcoin, probably in April. That will slow down the growth rate of Bitcoin supply. The last halving in May 2020 coincided with a bull market.
Ark Invest highlights the importance of maintaining a long-term perspective for Bitcoin investors. "Instead of 'when,' the better question is 'for how long?'" they write. They point out that holding Bitcoin for at least five years has generated profits for any investor throughout history. That said, Bitcoin is still trading below the highs it set in 2021.
While Ark's $2.3 million price target may be very aggressive, it is not unreasonable to expect Bitcoin to rise further from here. Given the catalysts for spot Bitcoin ETFs driving demand among a broader group of investors and the slower rate of supply growth due to the upcoming halving, there could still be room for the current market to run. bullish.
Adam Levy has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
