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ARK Invest’s 2023 Report Advocates 19.4% Bitcoin Allocation for Optimal Institutional Returns

ARK Invest’s latest research report for 2023 emphasizes Bitcoin’s exceptional historical performance compared to major assets and recommends an institutional portfolio allocation of up to 19.4% to optimize risk-adjusted returns.

Released on January 31st, the annual report explores the convergence of blockchain technology, artificial intelligence, energy storage, and robotics.

A substantial portion of the report focuses on Bitcoin portfolio allocation, tracing its performance since inception and scrutinizing its metrics over the past three years.

Long-term Performance:
ARK’s data reveals Bitcoin’s remarkable performance over extended periods, outshining traditional assets. Over seven years, Bitcoin boasted an annualized return averaging 44%, while other major assets averaged just 5.7%.

The report notes that investors with a “long-term time horizon” benefited significantly from holding Bitcoin for extended periods, as its historical volatility often masked its long-term profitability.

Optimal Allocation:
The report delves into the volatility and return profiles of traditional asset classes, suggesting that a portfolio aiming for maximized risk-adjusted returns would have allocated 19.4% to Bitcoin in 2023.

This represents a significant change over the past decade, with the optimal allocation varying from 0.5% in 2015 to 19.4% in 2023 on a five-year rolling basis.

Potential Valuations:
ARK’s research contemplates a hypothetical scenario in which institutional investments from the $250 trillion global investable asset base follow the recommended 19.4% Bitcoin allocation.

READ MORE: Swiss City of Lugano Embraces Diverse Digital Currency Landscape with Bitcoin, CBDCs, and Stablecoins

If just 1% of global assets were invested, Bitcoin’s price could reach $120,000 per BTC. Allocating the 4.8% average maximum Sharpe ratio from 2015 to 2023 could drive Bitcoin’s price to $550,000.

Following ARK’s 19.4% allocation, Bitcoin could reach an astounding $2.3 million per coin.

ARK’s research draws on empirical market data to justify its 19.4% Bitcoin allocation for risk-adjusted returns, a shift from previous years’ recommendations.

In January 2022, figures like Ray Dalio and Bill Miller suggested a portfolio allocation of 1% to 2% in Bitcoin.

A year earlier, JPMorgan’s investment strategists proposed a 1% portfolio allocation to Bitcoin as a hedge against fluctuations in traditional assets like stocks, bonds, and commodities.

ARK Invest’s report underscores Bitcoin’s evolving role as a viable and potentially lucrative asset class in institutional portfolios, reflecting the growing acceptance and recognition of cryptocurrencies in the broader financial landscape.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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