Arch Invest says that if this happens, Bitcoin could cost $2.3 million.

Cathy Wood's asset management firm, Arc Invest, has predicted that Bitcoin (BTC) prices could rise to $2.3 million if institutions allocate a portion of their asset base to investable assets.

The asset manager made the prediction in its research report, Big Ideas 2024, detailing the hypothetical impact of institutional investments and a $250 trillion global investable asset base on the price of BTC.

Bitcoin may be worth $2.3 million.

According to Ark Invest's analysis, a portfolio seeking to maximize risk-adjusted returns over a five-year time frame starting in 2015 would allocate 0.5% to BTC. Since then, on the same basis, the average allocation to the digital asset was 4.8%, only in 2023, such portfolios would allocate 19.4%.

Based on the analysis, a 1% allocation from the $250 trillion global investment asset base could push BTC to $120,000. An average high Sharpe ratio of 4.8% from 2015 to 2023 could see BTC rise to $550,000 and 2023. Following a 19.4% allocation by 2023, the asset could grow to $2.3 million.

“Bitcoin Volatility May Obscure Long-Term Returns. While significant appreciation or depreciation may occur in the short term, a long-term investment horizon is key to investing in bitcoin. A better question than “when” is “how long?” That's what it says. “Historically, investors who have bought and held bitcoin for at least 5 years have made almost no profit on any purchase,” the asset manager said.

BTC Strategic Allocation Value: Ark

On the other hand, the optimal portfolio allocation targets for assets such as gold, commodities, bonds, and stocks in 2023 are 40.7%, 9.6%, 0%, and 30.3%, respectively, over a five-year period like BTC.

Ark asserts that bitcoin qualifies as a “strategic allocation in institutional portfolios” enough to be a stand-alone asset class because the cryptocurrency's price movements rarely correlate with other asset classes.

Over the past five years, the correlation of BTC returns to traditional asset classes has averaged just 0.27, with the digital currency's annual return averaging 44% over the past seven years, compared to 5.7% for other major assets.