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ARK's latest report: Bitcoin will become an integral part of the balance sheets of more institutions and listed companies

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Bitcoin's market and investor base appear to be maturing.

Original source: Shenchao TechFlow

Original title: " ARK Goddess 2021 latest "Bigidea": Bitcoin is ready! "

ARK Investment is one of the most beautiful investment companies in the US market in the past year. Its founder and fund manager, Ms. Catherine Wood , has been regarded as the goddess of science and technology by countless investors.

In the past five years, ARKK, the largest product of ARK, has an average annualized rate of return of nearly 40%. More than 100%. Every move of the ARK fund has also become the focus of the market, and the "copying investment method" based on it as a model is becoming more and more popular.

Starting from 2017, ARK Investment will release the "Big Ideas" report at the beginning of the year to inspire investors to pay attention to technological breakthroughs and potential investment opportunities. In the "Big Ideas" released in 2019, ARK accurately judged the investment opportunities of new energy vehicles and Bitcoin.

The female stock goddess is not only a die-hard supporter of Tesla, but also a loyal fan of Bitcoin.

In 2015, when many people were still wondering what Bitcoin was, ARKW, a subsidiary of ARK Invest, entered the market in person and invested in the Bitcoin issued by Grayscale Investment. GBTC, at that time, the price of Bitcoin was only $250. About the growth history of ARK's female stock god, please refer to Shenchao TechFlow's previous article: "Queen's Investment Chess Game: Heavily holding Tesla, betting on Bitcoin, known as the female version of Buffett"

On January 27th, ARK 2021 Big Ideas was released as scheduled. The female stock goddess used 2 chapters out of 15 chapters to explain the fundamentals of Bitcoin and the analysis of institutional allocation of Bitcoin. According to ARK In the future, Bitcoin will become part of the balance sheets of many institutions and listed companies, and there will be a sea of stars to welcome Bitcoin.

The following is the content of the report on Bitcoin:

01 Bitcoin Fundamentals

Bitcoin hit a record high on the back of solid network fundamentals.

-While Bitcoin price is hitting new all-time highs, ARK research shows that the fundamentals of the network remain healthy.

- According to search volume compared to 2017, Bitcoin's price increase is not driven by hype. As bitcoin gains more trust, some companies are considering it as an asset on their balance sheets.

- If all S&P 500 companies allocated 1% of their cash to Bitcoin, ARK estimates that its price would increase by about $40,000. Bitcoin's price hit new all-time highs in late 2020 as support for its network grew.

Bitcoin market participants have never been more focused on the long term. As of November 2020, about 60% of the Bitcoin supply has not moved in more than a year, proving that there are longer-term followers and holders with stronger beliefs in the market. broad base.

Bitcoin's market and investor base appear to be maturing.

Bitcoin's liquid capitalization (a measure of the cost base of holders) has reached an all-time high, and the growing cost base suggests that early investors are Profits are being made while new investors are building positions and creating higher price support levels.

Compared to 2017, the hype surrounding Bitcoin is much more subdued today.

Bitcoin has seen low search interest relative to its price rise. When its price was near its all-time high, Bitcoin’s Google search interest was 15% of its all-time high.

Bitcoin's growing acceptance sets the stage for Ethereum and a new wave of financial experimentation.

We believe that decentralized finance (DeFi) has played a positive role in promoting the increased utilization of the Ethereum network.

By using Ethereum as a "trust-minimized" collateral, market participants can de-intervention of traditional financial companies, and obtain credit and lending, market making , trading, custody, investment and other financial services, and even to synthesize U.S. dollars. Bitcoin could play a pivotal role as "corporate cash."

Square and Microstrategy have both invested in Bitcoin and put it on their balance sheets, pointing the way for public companies to deploy Bitcoin as a legal alternative to cash .

According to our research, if all S&P 500 companies allocated 1% of their cash to Bitcoin, its price could increase by about $40,000.

02 Bitcoin: Getting Ready for Institutions

ARK believes that the rapid growth of Bitcoin has allowed investment institutions to position it as part of asset allocation in investment portfolios.

- We believe Bitcoin offers one of the most compelling risk-reward curves in assets.

- As our analysis suggests, its network capitalization could grow from about $500 billion to $1-5 trillion in the next five to ten years Dollar.

- We believe that capital allocators should consider ignoring the opportunity cost of Bitcoin as part of a new asset class.

Bitcoin continues to gain credibility.

Regulator

-OCC allows federally chartered banks and mutuals to Crypto Assets Offer Custody Services (6/22/2020)

-OCC Allows National Banks and Federal Savings Associations to Hold 'Reserves' on Behalf of Stablecoin-Issuing Clients (9/21/2020).

- OCC allows banks to run nodes on public blockchain networks to simplify payment functions such as processing, verification and settlement. (1/4/21)

Banks

-JP Morgan New Adds major cryptocurrency exchanges Coinbase and Gemini to bank clients (5/12/2020)

- Singapore's largest bank DBS announces plans to launch cryptocurrency exchange (10/27/2020)- Kraken Becomes the First Cryptocurrency Exchange to Charter Bank of America (9/16/2020) Institutional Investors

- Macro Investor Paul Tudor Jones Reveals 1% Bitcoin Allocation (5/11/2020)- Billionaire Stanley Druckenmiller Bets on Bitcoin (11/17/2020)

- Fidelity Digital to Hold Bitcoin as Collateral for Cash Loans (12/9/20)

- Insurance Giant MassMutual Invests $100M in Bitcoin (12/10/20) Public Company

-MicroStrategy Replaces Bitcoin with $500M in Cash( 7/20/2020)

- Square invests 1% of assets in Bitcoin (10/8/2020)

- PayPal Announces Cryptocurrency Buying and Selling Service (10/20/2020)

ARK believes that Bitcoin should be included in institutional portfolios Get strategic configuration.

Because it is not subject to traditional rules and regulations, and generally uncorrelated with the behavior of other asset classes, Bitcoin seems to have won the full Strategic Allocations in Diversified Portfolios. Bitcoin is the only major asset whose correlation with traditional asset classes has been consistently low over the past decade.

Bitcoin trading volume is comparable to large-cap stocks and is growing at an exponential rate.

ARK estimates that Bitcoin’s daily trading volume could surpass that of the U.S. stock market in less than 4 years, and in less than 6 years The trading volume in the global foreign exchange spot market exceeds that of the global foreign exchange spot market.

Institutional investors can acquire Bitcoin in complex ways.

Bitcoin open interest, or the total value of futures contracts in circulation, set a record on the Chicago Mercantile Exchange (CME) in October 2020 new highs. This figure has grown tenfold, reaching nearly $1 billion in 2020.

Integrated into a sophisticated financial infrastructure, CME allows investors of all risk appetites to gain exposure.

We believe Bitcoin has gained some allocation in a diversified portfolio.

Based on the daily returns of each asset class over the past 10 years, our analysis suggests that when volatility is minimal, an allocation to Bitcoin should be at 2.55%, when the rate of return is maximized, it should be at 6.55%.

In ARK's analysis, we performed Monte Carlo simulations on 1 million portfolios composed of different asset classes, as shown, capturing The highest return possible for a given level of volatility, stars indicate configurations associated with maximum Sharpe ratio and minimum volatility.

Institutional investment may have a material impact on the price of Bitcoin.

According to ARK's simulated portfolio allocation, institutions allocate Bitcoin between 2.5% and 6.5%, which may have an impact of 200,000 to 500,000 on the price of Bitcoin million dollar impact.