Digital Assets Could Rival and Redefine Traditional Asset Classes – Research Study

ARK Invest says it aims to deliver long-term capital appreciation by investing in the leaders, enablers, and beneficiaries of disruptive innovation. ARK has shared a detailed report that explores the potential impact of disruptive innovations, including AI and decentralized virtual currencies like Bitcoin and Ethereum.

ARK Invest, an investment firm that specializes in thematic investing and disruptive innovation, believes every investor should have “a strategic allocation to innovation, not only to access potential exponential growth opportunities typically absent from broad-based indices but also to hedge against the increasing risk that incumbents will be disrupted.”

To enlighten investors on the long-term impact of innovation, they began releasing Big Ideas in 2017.

This annual research report seeks to highlight the technological breakthroughs evolving today and creating the potential for super-exponential growth tomorrow.

ARK believes that innovation is taking off now, “corroborating their original research and boosting their confidence that ARK’s strategies are on the right side of change.

As stated in the extensive report from ARK Invest, the converging innovation platforms “involve 14 investable technologies undergoing steep cost declines, impacting multiple sectors, and serving as launching pads for more innovation.”

As explained in the report, ARK’s Convergence Scoring Framework And Network Graph take into consideration (among many other factors) technology scores, which are “a function of their potential to generate super-exponential growth as they catalyze other technologies.”

While commenting on some of the latest AI developments, ARK Invest notes that the “cost to train the state-of-the-art GPT-3 in 2020 was $4.6 million.”

Based on their modeling, the cost of training an AI model “with 57x more parameters and 720x more tokens than GPT-3 would drop from $17 billion today to $600,000 by 2030.”

Research suggests the optimal training dataset “for a 10 trillion parameter model would require at least 216 trillion tokens.”

For perspective, 216 trillion tokens are roughly “equivalent in size to 38,000.”

In a world of low-cost computing, data will “become the primary constraint.”

Going on to comment on other digital technology trends, ARK Invest noted that in 2022, digital leisure spending “totaled $6.6 trillion and, during the next eight years, should grow 17% at a compound annual rate to $22.5 trillion adjusted for inflation.”

According to ARK, some key trends should contribute to its growth:

  • New Social Platforms: Nearly 40% of Gen Z consumers prefer to search on TikTok and Instagram over Google Search and Maps. Social platforms with the best recommendation engines should command the majority of ad budgets, with content-based social media likely outperforming follow-and-feed social media.
  • Gaming: The convergence of video games and social media should sustain gaming revenue growth.

In addition to sharing these insights, ARK’s comprehensive report also mentioned that crypto-assets could rival and redefine traditional asset classes.

In the research report, Bitcoin (BTC) is referred to as a “durable network.”

As stated in the annual research report from Ark Invest:

“We believe Bitcoin’s long-term opportunity is strengthening. Despite a turbulent year, Bitcoin has not skipped a beat. Its network fundamentals have strengthened and its holder base has become more long-term focused.”

ARK’s report also delves into the latest innovations in the Ethereum and broader DeFi space:

“Contagion caused by centralized counterparties has elevated Bitcoin’s value propositions: decentralization, auditability, and transparency. The price of one bitcoin could exceed $1 million in the next decade.”

The report added:

“As insolvencies mounted across crypto lending businesses like Celsius and Voyager, decentralized lending markets like Aave continued to operate as designed. They processed deposits, withdrawals, originations, and liquidations without service interruption.”

The report further noted:

“Since November 2020, Aave has processed more than $75 billion in inflows and $66 billion in outflows, all autonomously via smart contracts. Risk controls and full transparency of deposits, loans, and collateralization ratios have contributed to DeFi’s stability.”

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