Ark Invest mentioned in its annual report “BIG IDEAS 2024” an analysis of various fields 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.”
Bitcoin’s correlation with traditional finance remains low.
Optimal Bitcoin allocation: 19.4%
How can Bitcoin reach $2.3 million?
Chapter 4: Bitcoin in 2023
Bitcoin’s price increased by 155% in 2023.
Ark Invest’s reliable indicator: On-chain market mean.
Bitcoin serves as a safe haven asset.
Four catalysts for Bitcoin in 2024.
Chapter 3: Bitcoin Asset Allocation
This chapter discusses how much funds investors should allocate to Bitcoin under the premise of controlled risks and maximizing returns.
Ark Invest also mentioned that if about 19% of the global investable assets are invested in Bitcoin, Bitcoin will reach $2.3 million.
Bitcoin surpasses all mainstream assets in the “long-term time frame.”
Ark Invest compared the performance of assets such as gold, commodities, real estate, bonds, stocks, and emerging markets in recent years and pointed out that Bitcoin’s long-term annualized return surpasses all mainstream assets.
However, it may not be fair to compare Bitcoin to mainstream assets as they have a long history and relatively stable volatility. In the past three years, Bitcoin’s average annual growth rate is slightly lower than that of commodities.
Bitcoin’s correlation with traditional finance remains low.
Despite the introduction of Bitcoin futures and spot ETFs, Bitcoin has not been fully embraced by traditional finance.
Ark Invest pointed out that Bitcoin’s correlation with traditional asset classes is low at 0.27, but even lower than that is the correlation between gold and commodities.
Asset Class Correlation
Optimal Bitcoin allocation: 19.4%
Based on maximizing risk-adjusted returns and setting a 5-year investment period, Ark Invest suggests the following allocation:
Gold: 40.7%
Stocks: 30.2%
Bitcoin: 19.4%
Commodities: 9.6%
How can Bitcoin reach $2.3 million?
Last year, Ark Invest made predictions for different market environments and believed that Bitcoin would reach $258,500 to $1.48 million by 2030.
This year, Ark Invest divided the allocation of Bitcoin based on the “global investable assets” of $250 trillion, as follows:
1% allocation: Bitcoin will reach $120,000.
4.8% allocation: Bitcoin will reach $550,000.
19.4% allocation: Bitcoin will reach $2.3 million.
Chapter 4: Bitcoin in 2023
Ark Invest analyzed how Bitcoin recovered amid various negative factors in 2022 and demonstrated its resilience as a hedge asset in 2023. It also mentioned the impact of the introduction of Bitcoin spot ETFs.
Bitcoin’s price increased by 155% in 2023.
This chapter begins with the full-year trend of Bitcoin in 2023 and marks significant events, from the Silicon Valley Bank crisis at the beginning of the year to the resignation of CZ, the founder of Binance, as CEO at the end of the year. Bitcoin’s rally also pushed the total market capitalization of cryptocurrencies to $827 billion.
Major events in 2023
Ark Invest’s reliable indicator: On-chain market mean
The report states that Ark Invest has always used the on-chain market mean as a reliable indicator to identify the rise and fall of Bitcoin. From past trends, it can be observed that when the Bitcoin price is higher than the on-chain market mean, it is usually in the early stage of a bull market.
BTC (purple line) surpassing the on-chain market mean (parallel gray line) on 1/11.
Bitcoin as a safe haven asset
During the banking crisis in the United States in March last year, the US KBW Banking Index plummeted, while Bitcoin quickly rose by more than 40% by May, emphasizing its role as a hedge asset.
Bitcoin’s contrary rise in March last year.
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 changing views on Bitcoin.
Bitcoin spot ETF: Reduces the learning curve and complexity of investing in BTC.
Regulatory developments: Bankruptcies of Celsius, FTX, and others drive regulatory developments, including the implementation of the EU MiCA law.
Ark Invest’s annual forecast 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 convincing to a certain extent.
However, some of the predictions and positions in the report should be verified, especially considering that Ark Invest is also an issuer of Bitcoin spot ETFs. Looking back at Ark Invest’s past predictions, they have always been overly optimistic about the extent of Bitcoin’s rise.
Big Ideas 2024
bitcoin
BTC
Ark Invest
Bitcoin
stocks
gold
Further reading
Bitcoin’s impressive historical increase in February, Matrixport analyst: Resistance at $44,000 is the key to further increase.
Non-farm payroll data is positive, US stocks reach new highs, Bitcoin returns to $43,000.