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Bitcoin (BTC) is an effective diversifier and counterbalance to traditional asset classes, and the optimal allocation in an investment portfolio is just under 20%, says Cathie Wood’s ARK Invest. writing. Annual Big Ideas Report Towards 2024.
“Bitcoin has delivered significantly higher annualized returns than major asset classes over the past seven years, with the optimal allocation rising to 19.4% in 2023,” the company wrote. “Our analysis suggests that allocating 19.4% to Bitcoin in 2023 would have maximized the risk-adjusted return of the portfolio.”
The optimal allocation was 0.5% in 2015 and 6.2% in 2022.
“Bitcoin is not just a new investment option, it is an important element for diversifying your investment portfolio, offering unprecedented growth potential among digital assets,” the company added.
Bitcoin’s low five-year correlation with traditional assets of 0.27 highlights Bitcoin’s diversification benefits, making it an attractive asset for institutional investment given the massive $250 trillion global investable asset base. Even a minimal allocation by a home can have a noticeable impact on its price, ARK writes.
The top cryptocurrency by market value has increased by 77.8% since last year. According to CoinDesk index data.
In a recent report, JP Morgan Attribution Bitcoin’s recent outperformance and increased institutional demand has driven it to a yearly high, with significant inflows into large wallets and CME Bitcoin futures, which are primarily used by institutional investors. highlighted by the sharp increase in
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