NEW YORK, NY – Bitcoin has emerged as an effective way to diversify and balance traditional investment portfolios, according to the annual Big Ideas report for 2024 by Cathie Wood’s ARK Invest. The report recommends allocating just under 20% of one’s portfolio to Bitcoin, citing its impressive annualized returns over the past seven years.
The firm’s analysis suggests that allocating 19.4% to Bitcoin in 2023 would have maximized a portfolio’s risk-adjusted returns. This marks a significant increase from the optimum allocation of 0.5% in 2015 and 6.2% in 2022. ARK Invest emphasized that Bitcoin is not just a new investment option, but a crucial component for diversifying investment portfolios, offering unparalleled growth potential among digital assets.
One of Bitcoin’s key advantages is its low five-year correlation of 0.27 with traditional assets, highlighting its potential for diversification in investment portfolios. The report also notes that even minimal allocations by institutional investors could significantly impact its price, given the vast $250 trillion global investable asset base.
Bitcoin’s recent performance has been impressive, with a 77.8% increase in value over the past year according to CoinDesk Indices data. JPMorgan also attributed Bitcoin’s recent outperformance and year-high to increased institutional demand, notably highlighted by significant inflows into large wallets and a spike in CME bitcoin futures predominantly used by institutions.
These findings underscore the growing influence of Bitcoin in the investment world, as institutional investors continue to show interest in the leading cryptocurrency. As the investment landscape continues to evolve, the role of digital assets like Bitcoin in traditional portfolios is becoming increasingly significant.