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1 Top Cryptocurrencies to Buy Before They Soar 4,500%, According to Cathie Wood’s Ark Invest
Cathie Bois and his team at Ark Invest focus exclusively on disruptive technologies. And one of the biggest upheavals of the last 15 years is Bitcoin (CRYPTO: BTC) and the idea of a blockchain.
Bitcoin opened the door for developers to create many cryptocurrencies with varying degrees of utility. However, Wood and his team believe there is still a lot to like about the original cryptocurrency. They see several catalysts that could drive the price of Bitcoin higher.
The main factor likely to drive the price of Bitcoin higher in 2024 is its adoption by institutional investors. Ark estimates that if the $250 trillion in global investable assets allocated an optimal amount to Bitcoin, it would drive the cryptocurrency’s price to $2.3 million. This represents a 4,500% increase from the current price of around $52,000.
Bitcoin has a place in every wallet, says Cathie Wood
Bitcoin has proven to be a good diversification asset for investors over the past few years. It has a moderate price correlation with stocks and even less with other asset classes. In other words, the price of Bitcoin is not closely linked to price fluctuations of other assets like stocks or bonds. As such, Ark Invest asserts, it is up to investment portfolios to maximize risk-adjusted returns.
Ark analysts found that the optimal exposure to Bitcoin in 2023 to maximize risk-adjusted returns would have been 19.4% of a portfolio. If this percentage of all investable assets in the world were invested in Bitcoin, the cryptocurrency would have a market capitalization of approximately $48.5 trillion. Its current market capitalization hovers around $1 trillion. Factor in the slowing increase in Bitcoin supply due to continued mining and you get a price of $2.3 million.
It’s important to note that Ark’s optimal portfolio allocations may be a bit skewed, as they are backward-looking. While it can be helpful to look to the past to get a sense of 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 soaring 150% in 2023, Bitcoin may no longer offer the same risk/reward profile as it did early last year.
Ark offers more reasonable overall asset allocations for Bitcoin. The average optimal Bitcoin allocation at the start of each year since 2013 is 4.8%. If investment managers target this figure, the price of Bitcoin is expected to reach around $550,000. If investors allocate just 1% of their portfolio to Bitcoin, Ark sees the price rise to $120,000, which is still more than double the current price.
The story continues
Importantly, it is now easier than ever for institutional investors to add exposure to Bitcoin. Bitcoin Spot Exchange Traded Funds (ETFs) Launch in January, Including Ark’s Ark 21Shares Bitcoin ETF (NYSEMKT:ARKB), provides a simple way to manage Bitcoin in a wallet. It could also open the door for investors to add exposure to retirement accounts such as IRAs and 401(k)s.
This could be just one of several major catalysts driving demand for the limited supply of cryptocurrency.
Now is the time to buy Bitcoin
In addition to the increased ease of adding Bitcoin to a portfolio via spot ETFs, Ark sees a few other reasons why we could be at the start of another bull market for Bitcoin.
First, a technical indicator created by Ark, called the on-chain market average, shows the Bitcoin price surpassing the indicator’s threshold late last year. Historically, surpassing the on-chain market average has signaled the early stages of a bull market.
Another catalyst is the halving later this year. The block reward paid to miners for successfully confirming a block will increase from 6.25 Bitcoin to 3.125 Bitcoin, likely in April. This will slow down the growth rate of Bitcoin’s supply. The last halving in May 2020 coincided with a bull market.
Ark Invest highlights the importance of maintaining a long-term outlook 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 climb higher from here. Given the catalysts for spot Bitcoin ETFs driving demand among a broader group of investors and the slower supply growth rate due to the upcoming halving, there could still be room for that the current bull market continues.
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Adam Levy has positions in Bitcoin. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.
1 Top Cryptocurrencies to Buy Before They Soar 4,500%, According to Cathie Wood’s Ark Invest was originally published by The Motley Fool