"Over the last seven years, Bitcoin has registered an annualized return far surpassing that of major asset classes, with an optimal allocation rising to 19.4% in 2023," the firm wrote. "Our analysis suggests that allocating 19.4% to Bitcoin in 2023 would have maximized a portfolio’s risk-adjusted returns."
The optimum allocation was 0.5% in 2015 and 6.2% in 2022.
"Bitcoin is not just a new investment option but a vital component for diversifying investment portfolios, offering unprecedented growth potential among digital assets," the firm added.
Bitcoin's low five-year correlation of 0.27 with traditional assets underscores its diversification benefits, and even minimal allocations by institutional investors could notably influence its price, given the vast $250 trillion global investable asset base, ARK writes.
The leading cryptocurrency by market value is up 77.8% over the last year, according to CoinDesk Indices data.
In a recent report, JPMorgan attributed bitcoin's recent outperformance and year-high to increased institutional demand, highlighted by significant inflows into large wallets and a spike in CME bitcoin futures used predominantly by institutions.
However, this institutional-driven rally might be coming to a close. The Guppy indicator, which sparked a 70% Bitcoin rally in late 2023, is now signaling a potential bearish downturn.
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