In its annual report, Ark Invest specifies the conditions that would allow Bitcoin to rise to $ 500,000. This price assumes an allocation by institutional investors of 6.5% of their assets.
Specialist in investment advice, Ark Invest unveils its annual report. The company explores the major trends to follow in terms of innovation. And, unsurprisingly, the famous Bitcoin is on the list.
Ark is therefore interested in the prospects of the cryptoasset in terms of value. And this future price will depend very strongly on the allocation by institutions. “As bitcoin appears to be gaining in confidence, some companies view it as cash on their balance sheets,” the report said.
Bitcoin an alternative to cash for the S&P 500
However, this strategy still only affects a handful of companies, especially among listed companies. MicroStrategy is undeniably the most visible in this area with a Bitcoin heritage exceeding $ 2 billion.
But the miner Marathon now also aligns with this policy with a $ 150 million BTC investment. However, it will take many other firms to drive the price of cryptocurrency higher.
Ark Invest thus makes assumptions. To grow by around $ 40,000, for example, Bitcoin would need all S&P 500 companies to allocate 1% of their cash to assets. Such a scenario would also reflect long-term participation.
This trend is already strengthening, however. In November 2020, about 60% BTC “Hadn’t moved in over a year.” For the authors of the report, this indicator “reflects the long-term direction of the market and a more convinced base of holders. ”
Thus, new investors would tend to establish positions and favor reaching “higher support levels.” But if companies like Square and Microstrategy lead the way, they still need consensus to pull the price of BTC.
Ignoring Bitcoin, a costly mistake for institutions
And the ambition of these precursors is therefore to underline the interest of listed companies in investing in Bitcoin as a legitimate alternative to cash. With therefore an allocation of 1% in favor of the crypto, its value would gain 40,000 dollars, estimates Ark.
At 10%, the jump would be around $ 400,000. Is such a hypothesis conceivable? Long term, consider the report. The authors want to be optimistic. They estimate that capitalization could climb from $ 500 billion to $ 1,000 or $ 5,000 billion within five to ten years.
“In our view, those responsible for capital allocation should consider the opportunity cost of ignoring bitcoin as part of a new asset class,” Ark warns.
Institutional investors could therefore miss out on major opportunities by ignoring the cryptoasset. However, these will have to allocate sufficient amounts. Bitcoin allocations “should be between 2.55% to minimize volatility and 6.55% to maximize returns,” Ark said.
And the more institutions invest, the greater the value of the cryptocurrency. “Based on the portfolio allocations simulated by ARK, institutional allocations between 2.5% and 6.5% could impact the price of bitcoin by $ 200,000 to $ 500,000.