ARK Invest’s 2023 research report underscores Bitcoin‘s exceptional performance compared to traditional investment assets, with a staggering average annual return of 44% over the past seven years, dwarfing the 5.7% average of other major assets. The report, released on January 31st, delves into the convergence of blockchain technology, artificial intelligence, energy storage, and robotics, dedicating a significant portion to Bitcoin’s portfolio allocation and its performance data over the last three years.
The report emphasizes Bitcoin’s long-term investment appeal, suggesting that investors with a longer time horizon tend to benefit from holding the cryptocurrency for extended periods. Despite Bitcoin’s historical volatility, the research advises that the key to profitability lies in the investment duration rather than timing, with a five-year holding period typically resulting in gains.
ARK’s analysis of volatility and return profiles of traditional assets proposes that an optimal portfolio for maximizing risk-adjusted returns in 2023 would have included a 19.4% allocation to Bitcoin, highlighting the cryptocurrency’s potential in investment strategies.
The research also explores the hypothetical impact of institutional investments from the $250 trillion global investable asset base adopting a 19.4% Bitcoin allocation. Such a scenario could have propelled Bitcoin’s price to unprecedented levels, with a 1% global asset investment potentially driving the price to $120,000, and a 4.8% allocation based on the Sharpe ratio from 2015 to 2023 could have seen a price of $550,000. A full 19.4% allocation would suggest a staggering valuation of $2.3 million per Bitcoin token.
ARK’s comprehensive market data analysis supports the 19.4% Bitcoin allocation for optimal risk-adjusted returns, aligning with projections from other leading investment analysts and experts in previous years. The research underscores the growing recognition of Bitcoin’s role in diversified investment portfolios.