ARK Invest Says Optimal Bitcoin Portfolio Allocation for 2023 Was 19.4% (2024)

FAQs

ARK Invest Says Optimal Bitcoin Portfolio Allocation for 2023 Was 19.4%? ›

According to Ark Invest, the optimal allocation of Bitcoin to a portfolio in 2023 was 19.4%. That's a big increase from the year-earlier period, when the optimal allocation was 6.2%. And that, in turn, was a significant increase from the year-earlier period, when the optimal allocation was 4.8%.

The Tangency portfolio (TP) – the optimal portfolio realizing the highest possible Sharpe ratio – representing the portfolio with the highest risk-adjusted return – tells us to allocate 14,42% to Bitcoin.

Bitcoin (BTC) is an effective diversifier and counterbalance to traditional asset classes, and an optimal allocation in one's investment portfolio is just under 20%, Cathie Wood's ARK Invest wrote in its annual Big Ideas report for 2024.

Most financial experts recommend limiting crypto exposure to less than 5% of your total portfolio. Crypto is considered a high-risk asset class. Limiting allocation helps manage overall volatility and risk. Those new to crypto investing may start with 1% to 2% as an introduction.

In a recent interview, she revealed that ARK has "brought forward" its previous $1 million price target for Bitcoin by 2030.

A good asset allocation varies by individual and can depend on various factors, including age, financial targets, and appetite for risk. Historically, an asset allocation of 60% stocks and 40% bonds was considered optimal.

The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.

Ark Invest's Cathie Wood said bitcoin's price could surge by almost 33-fold to $1.5 million by 2030. "Shark Tank" investor Kevin O'Leary said that would only happen if the US economy collapsed. O'Leary predicted bitcoin would outperform the S&P 500, rising as high as $250,000 this decade.

The ARK Innovation ETF (ARKK), ARK Genomic Revolution ETF (ARKG), ARK Fintech Innovation ETF (ARKF), and ARK Autonomous Technology & Robotics ETF (ARKQ) are among the best ARK ETFs available to investors. These funds provide exposure to disruptive technologies and sectors with long-term growth potential.

ARK recognizes that disruptive innovation causes rapid cost declines, cuts across sectors, and spawns further innovation. Through an iterative investment process, combining top-down and bottom-up research, ARK aims to identify innovation early, capitalize on the opportunities, and provide long-term value to investors.

What percentage is good to buy Bitcoin? ›

In an interview with CNBC Make It, he offers this advice to other young people looking to join the crypto-craze: Invest 10 percent of your income into the top cryptocurrencies, especially bitcoin. "I'd just put it into bitcoin," he says. "I think bitcoin is the safest cryptocurrency right now."

The portfolio should have between 25 and 50 tokens at the most, and the way you choose the altcoins makes all the difference. The same rule applies to investing in a small startup company.

Looking for a specific percentage? While advice varies, most financial advisors tend to advise that crypto make up no more than 1% to 5% of a portfolio (though some advisors may recommend up to 10%).

If Wood is correct and Bitcoin does reach $3.8 million by 2030, an investment of $1,000 would be worth over $60,000. This would result in a compound annual growth rate (CAGR) of over 100%. Read Next: Bitcoin has jumped another 45% already this year – how much would you need to get started today?

Ark Invest CEO Cathie Wood called bitcoin (BTC) a “financial super highway,” emphasizing the important use cases for the cryptocurrency in emerging markets.

Wood's prediction for a $3.8 million BTC by 2030 also likely includes the next halving, which could occur in 2028. Looking at Bitcoin's price history, halvings typically precede higher highs, followed by higher lows. If Bitcoin continues this pattern into 2030, the price could peak around 2029 or 2030.

Owning 51% of the nodes on the network theoretically gives the controlling parties the power to alter the blockchain. The attackers would be able to prevent new transactions from gaining confirmations, allowing them to halt payments between some or all users.

Insights for Your Portfolio

1) While an 85% allocation to any single asset, including Bitcoin, may seem excessive in terms of diversification, the significance of BlackRock's study lies in its potential impact on the perception of Bitcoin and the broader Web3 sector among both retail and institutional investors.

A portfolio of 10 or more stocks, particularly those across various sectors or industries, is much less risky than a portfolio of only two stocks.

As a result, investors will want a limit of how many assets to include in their portfolio to gain the optimal level of reduced risk while simultaneously reducing excess trading costs. Most industry professionals estimate a number of assets ranging from 20-30 in a portfolio to reduce the market risk.