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 consulting, Ark Invest unveils its annual report. The company explores the major trends to follow in terms of innovation. And, not surprisingly, the famous Bitcoin is included in the list.
Ark is therefore interested in the prospects of crypto-assets in terms of value. And this future price will depend very strongly on the allocation by institutional investors. “As Bitcoin seems to be gaining confidence, some companies are considering it as cash on their balance sheet,” the report points out.
However, this strategy still concerns only a handful of companies, particularly among listed companies. MicroStrategy is undeniably the most visible with a Bitcoin asset base in excess of $2 billion.
But the miner Marathon is now also aligning itself with this policy with a $150 million investment in BTC. Nevertheless, it will take many other firms to raise the price of cryptocurrencies.
Ark Invest makes some assumptions. For example, to grow by about $40,000, Bitcoin would need all S&P 500 companies to allocate 1% of their cash to assets. Such a scenario would also reflect a long-term investment.
This trend is already strengthening, however. In November 2020, approximately 60% of the BTC “had not moved for more than a year”. For the authors of the report, this indicator “reflects the long-term orientation of the market and a more convinced holder base. »
In this way, new investors would tend to establish positions and encourage the achievement of “higher” support levels. “But while companies like Square and Microstrategy are leading the way, they have yet to reach a consensus to drive the price of BTC.
And the ambition of these precursors is therefore to underline the interest of listed companies to invest in Bitcoin as a legitimate alternative to cash. With a 1% allocation to crypto, its value would gain 40,000 dollars, Ark estimates.
At 10%, the jump would be around 400,000 dollars. Is such a hypothesis imaginable? In the long term, consider the report. The authors are optimistic. They estimate that capitalization could rise from 500 billion to 1,000 or 5,000 billion dollars in five to ten years.
“In our opinion, those responsible for allocating capital should consider the opportunity cost of ignoring bitcoin as part of a new asset class,” warns Ark.
Institutions could therefore miss out on major opportunities by ignoring crypto assets. However, they will have to allocate sufficient amounts. Bitcoin allocations “should be between 2.55% to minimize volatility and 6.55% to maximize returns,” argues Ark.
And the more institutional investors invest, the more significant the value of the cryptocurrencies will be. “Based on the portfolio allocations simulated by ARK, institutional allocations between 2.5% and 6.5% could have an impact of $200,000 to $500,000 on the price of Bitcoin. »