Bitcoin outperforms every other asset, over every time period – analysis

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REPORT: Bitcoin outperforms every other asset, over every time period

A new report suggests Bitcoin is one of the ‘safest’ places to keep your money. Sort of.

A new analysis from Brave New Coin has found that Bitcoin has outperformed every other asset class over every time period studied.

Past performance does not predict future returns of course, but the report suggests that buying Bitcoin was a better move than buying stocks, bonds, gold, silver or oil at pretty much any time.

An important caveat is the returns studied were absolute and not risk-adjusted, so they don’t account for Bitcoin’s notorious volatility.

The researcher did not examine returns from those who bought in at the all-time high (who’d still be down by half).

And of course, smart investors always diversify across different asset classes, so the key takeaway is not that people should have gone ‘all in’ on Bitcoin.

BTC compared to other assets

The researchers compared the absolute returns of Bitcoin versus stocks, bonds, gold, silver, and oil over the past one year, three years and five years.

Stocks and bonds are generally key components in institutional investment portfolios, while gold and similar share similar characteristics to Bitcoin as a store of value. Oil has a low correlation to stocks and bonds.

Bitcoin’s one-year, three-year, and five-year returns were as follows:

  • One year: 20%
  • Three years: 1420%
  • Five years: 1550%

The next best-performing asset was stocks (S&P 500 w/ Dividends Reinvested) which returned 8.44% over one year, 46.55% over three years, and 66.29% over five years.

AAA-rated corporate bonds also did pretty well with one year (11.08%), three years (10.22%), five years (24.4%).

Gold and silver did very poorly, with neither being profitable investments over the longer term.

Oil bounced around from negative one-year returns (-13.96%) to positive returns over 3 years (up 46.09%) and then negative returns over five years (-41.72%).

Bitcoin compared to other assets

Experts suggest Bitcoin should only make up a small part of a portfolio

Author Alex Lielacher said in the analysis that the high returns mean Bitcoin is an excellent addition to a portfolio but added that “due to the high risk compared to traditional assets, most experts agree that Bitcoin should only make up a small percentage of a portfolio.”

As Tim Enneking, managing director of Digital Capital Management, said: “You’re a fool if you don’t invest in crypto assets … (but) “you’re also a fool if you invest too much.”

Enneking believes that most people should have one to two percent of their portfolio in Bitcoin while enthusiasts could have between five and ten percent.

Bitwise actually ran the numbers on adding one percent, five percent, and 10 percent Bitcoin allocation to a stocks and bond portfolio across January 2014 to March 31, 2018 (after the ATH crash).

A Bitcoin-free portfolio would have returned 26.53%. Adding one percent BTC increased returns to 31.09%, while five and ten percent BTC allocation increased returns to 50.89% and 78.38%, respectively.

eToro’s senior market analyst Mati Greenspan writes that “crypto-assets provide an excellent tool for portfolio management due to their asymmetric risk,” meaning you could lose whatever you invested, or you could end up with huge returns.

It is a view shared by Morgan Creek Digital’s Anthony Pompliano who suggests investors add five percent to their portfolios.

That way if Bitcoin goes to zero, losses are limited, but they still have enough exposure to benefit if it hits $100,000 – and Pompliano believes it will.