Lower price swings, larger investments: Ark Invest believes bitcoin is moving into a new phase

Bitcoin’s Evolving Market Landscape

According to David Puell of Ark Invest, the next chapter for Bitcoin (BTC) will be shaped less by investor conviction and more by the scale and method of their participation. The focus is shifting to how much exposure investors choose and which investment vehicles they use.

Puell, who serves as a research trading analyst and associate portfolio manager for digital assets at Ark Invest, highlighted that Bitcoin has entered a new era of institutional adoption. This transformation follows the introduction of spot Bitcoin exchange-traded funds (ETFs) in 2024 and the rapid expansion of digital asset treasury (DAT) strategies.

“In earlier cycles, much of the necessary infrastructure was still under development,” Puell explained in an interview with CoinDesk. “Today, the question isn’t whether to invest in Bitcoin, but rather how much to allocate and through which channels.”

Since receiving regulatory approval in early 2024, U.S. spot Bitcoin ETFs have quickly become a major source of capital inflow for the cryptocurrency. These funds have collectively attracted over $50 billion in net investments within approximately 18 months, signaling a significant move toward institutional and regulated access to Bitcoin without the need for direct self-custody.

Leading the charge are BlackRock’s iShares Bitcoin Trust (IBIT) and Fidelity’s Wise Origin Bitcoin Fund (FBTC), which have captured the majority of these inflows. Their dominance has contributed to increased liquidity and a tighter supply, with estimates suggesting these ETFs now hold substantial quantities of Bitcoin.

This institutional shift has had a noticeable effect on the market’s supply and demand dynamics. Puell noted that ETFs and digital asset treasury vehicles now account for about 12% of Bitcoin’s total supply, surpassing initial projections and emerging as a key factor influencing price movements through 2025 and potentially into 2026.

Digital asset treasury companies are publicly listed firms that primarily hold Bitcoin or other digital assets as core reserves to enhance shareholder value.

At the same time, Puell observed a counterbalancing trend: long-term holders who acquired Bitcoin over a decade ago are increasingly taking profits as prices reach new highs.

“During bull markets, early adopters tend to sell more aggressively near the peak,” Puell said. “In downturns, they are more likely to hold. This dynamic created a tug-of-war in 2025, with early investors cashing out while institutions were accumulating through ETFs and DATs.”

Despite these competing forces, Ark Invest maintains a positive long-term outlook. The firm’s valuation model for 2030 forecasts a conservative scenario of around $300,000 per Bitcoin, a base case near $710,000, and an optimistic projection of approximately $1.5 million per coin.

Key Drivers and Market Dynamics

Puell attributes the bulk of Ark’s conservative and base case projections to Bitcoin’s function as a digital store of value, while institutional investment is expected to drive the most significant gains in the bullish scenario.

One notable trend is the increasing proportion of Bitcoin that is effectively “vaulted.” On-chain metrics indicate that network liveliness has hovered near 60% since early 2018, which Ark interprets as about 36% of the total supply being held by long-term investors.

Broader economic factors may also bolster Bitcoin’s prospects in the years ahead. Puell suggested that an end to U.S. monetary tightening could restore liquidity to the market, a condition that has historically benefited risk assets like Bitcoin.

“U.S. liquidity is more influential for Bitcoin than global M2,” Puell remarked, pointing out that other countries often follow the U.S. due to its dominant position in global finance.

Another significant development is Bitcoin’s declining volatility. Puell noted that price swings have reached historic lows, supporting Ark’s view that Bitcoin’s risk-adjusted returns are improving.

“In past bull markets, it was common to see price drops of 30% to 50%,” he said. “Since the 2022 low, Bitcoin hasn’t experienced a decline greater than about 36%, which is unusual.”

This reduction in volatility and smaller drawdowns may make Bitcoin more attractive to risk-averse investors who were previously discouraged by extreme price swings.

“There are now more sophisticated investors who avoid chasing parabolic rallies and instead reserve capital to invest during market corrections,” Puell explained. “This behavior helps smooth out volatility and shortens recovery times.”

Puell also cited increased regulatory clarity under the Trump administration, the rise of staking-focused ETFs, and growing interest from state governments—Texas being a notable example—as long-term structural advantages. While a U.S. strategic Bitcoin reserve would not generate new demand, he believes it would strengthen the base of committed holders.

Ark has made one significant revision to its outlook: some of the safe-haven demand from emerging markets that was expected to flow into Bitcoin has instead shifted toward stablecoins. However, Puell said this effect is largely balanced by greater-than-anticipated demand for Bitcoin as a digital gold alternative within Ark’s framework.

“We’re largely maintaining our targets,” Puell stated. “While the sources of demand have shifted, our long-term thesis remains robust.”

Looking past 2026, Puell emphasized that Ark is focused on a five-year perspective rather than short-term price predictions. He argued that Bitcoin’s evolution into a less volatile, institutionally held asset could ultimately be as significant as any specific price milestone.