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1 of the best cryptocurrencies to buy before it rises 4,500%, according to Cathie Wood’s Ark Invest
Cathie Wood and his team at Ark Invest focus exclusively on disruptive technology. And one of the biggest disruptors of the last 15 years it is Bitcoin (CRYPTO: BTC) and the idea of a blockchain.
Bitcoin has opened the door for developers to create numerous cryptocurrencies with varying degrees of utility. However, Wood and his team believe there is still a lot to appreciate in the original cryptocurrency. They see several catalysts that could drive the price of Bitcoin higher.
The main factor that could push the price of Bitcoin higher in 2024 is adoption by institutional investors. Ark believes that if the $250 trillion in global investable assets were allocated an optimal amount to Bitcoin, the cryptocurrency’s price would reach $2.3 million. That’s a 4,500% increase from today’s price, about $52,000.
Bitcoin belongs in every wallet, says Cathie Wood
In recent years, Bitcoin has proven to be a good diversifying asset for investors. It has moderate price correlation with stocks and even less correlation with other asset classes. In other words, the price of Bitcoin is not closely linked to the price fluctuations of other assets such as stocks or bonds. As such, Ark Invest argues, it makes sense for investment portfolios to maximize risk-adjusted returns.
Ark analysts found that the optimal exposure to Bitcoin in 2023 to maximize risk-adjusted returns would be 19.4% of a portfolio. If that percentage of all investable assets in the world flowed into Bitcoin, the cryptocurrency would have a market capitalization of approximately $48.5 trillion. Its current market capitalization is around $1 trillion. If you take into account the slow increase in Bitcoin supply resulting from continuous mining, 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 looking to the past to get a sense of historical norms can be helpful, 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 it did at the beginning of last year.
Ark offers more reasonable global asset allocations for Bitcoin. The average optimal allocation for Bitcoin at the start of each year since 2013 is 4.8%. If investment managers target that figure, Bitcoin’s price is expected to rise to around $550,000. If investors allocated just 1% of their portfolios to Bitcoin, Ark predicts the price will rise to $120,000, which is still more than double today’s price.
The story continues
Importantly, it is now easier than ever for institutional investors to increase exposure to Bitcoin. The launch of Bitcoin spot exchange-traded funds (ETFs) in January, including Ark Ark 21Shares Bitcoin ETF (NYSEMKT:ARKB), provides an easy way to manage Bitcoin in a wallet. It could also open the door for investors to add exposure in retirement accounts like IRAs and 401(k)s.
This could be just one of many important catalysts to stimulate demand for the limited supply of cryptocurrency.
Now is the time to buy Bitcoin
Beyond the increased 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 the price of Bitcoin rising above the indicator’s threshold level late last year. Historically, breaking above the chain market average has signaled the early stages of a bull market.
Another catalyst is the halving by the end of the year. The block reward paid to miners for successfully confirming a block will go from 6.25 Bitcoin to 3.125 Bitcoin, likely in April. This will slow 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 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 led to profits for any investor throughout history. That said, Bitcoin is still trading below the highs 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 may still be room for the current bull market.
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Adam Levy has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
1 of the best cryptocurrencies to buy before it rises 4,500%, according to Cathie Wood’s Ark Invest was originally published by The Motley Fool