Bitcoin (BTC) is an effective diversifier and counterweight to traditional asset classes, and an optimal allocation in one's investment portfolio is just under 20%, wrote Cathie Wood's ARK Invest in its annual Big Ideas report for 2024.
“Over the past seven years, Bitcoin has delivered an annual return that far exceeds that of major asset classes, with the optimal allocation increasing to 19.4% in 2023,” the company wrote. “Our analysis suggests that a 19.4% allocation to Bitcoin in 2023 would have maximized a portfolio’s risk-adjusted returns.”
The optimal allocation was 0.5% in 2015 and 6.2% in 2022.
“Bitcoin is not just a new investment option, but an important component for diversifying investment portfolios and offers unprecedented growth potential among digital assets,” the company added.
Bitcoin's low 0.27 5-year correlation with traditional assets underscores its diversification benefits, and even minimal allocations by institutional investors could significantly impact its price given the massive $250 trillion global investable asset base, ARK writes.
According to data from CoinDesk Indices, the leading cryptocurrency by market value is up 77.8% over the last year.
In a recent report, JPMorgan attributed Bitcoin's recent outperformance and yearly high to increased institutional demand, highlighted by significant inflows into large wallets and a surge in CME Bitcoin futures, which are predominantly used by institutions.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers