The S&P 500 Could Be a Better Long-Term Bet Than Bitcoin

The last time I wrote about it Bitcoin (CCC:BTC-USD) Late May 2021It traded around $37,500. This represents a 16% increase over the past 7.5 months.

Source: shutterstock

Although it is good, it is not the type of return that investors are used to with BTC-USD. For example, if you have purchased SPDR S&P 500 ETF Trust (New York:spy) Last May, you would have made a 13% return with much lower risk and volatility.

It got me thinking: Given 277 Standard & Poor’s 500 Stocks have performed at par or better over the past year – from January 12, 2021 to January 12, 2022 – Bitcoin no longer appears to be the great destined.

One could argue that the index is a superior, risk-adjusted investment over the next decade. Here’s why.

Bitcoin has led the way over the past decade

the Headline for March 2021 in a Queen Telegraph Everything said: BTC has been the top performing asset of the last decade at 1,000%. The proof comes from Charlie Bellello, who is arguably the biggest eccentric on Twitter.

While Bellillo’s guides aren’t as pretty as Ben Carlson’s guide A wealth of common senseAnd It shows that Bitcoin revolves around all other asset classes in between March 13, 2011 and March 13, 2021. Delivered an annual return of 230.6% compared to 11 times better than Invesco NASDAQ 100 ETF (NASDAQ:QQQ), which gained 20% annually.

How has the S&P 500 performed? Billello did not include the index. However, it had a large stock in the third rank with 14.0%. This is very close. In Carlson’s Jan. 9 update, all caps were the first over the past decade at 16.4%.

Only REITs (2014 and 2015) and big hats (2019 and 2020) repeated the years as the best asset class on the Carlson chart. It was Bellello’s BTC-USD, which offered three different streaks over the past decade – 2011 to 2013, 2015 to 2017, and 2019 through March 13, 2021 – so it took a lot of bragging rights in 2010.

The one thing these 10-year charts show is that a certain asset class may lead the way in any given year, but in the end, someone else often takes the baton from them the following year.

I suspect that when we look back at the decade that was, sometime in the year 2032, we’ll see that Bitcoin, or more likely some other cryptocurrency, had periods of outperformance.

But since I am a firm believer in getting back to the mean, I suspect that 100%+ annual bitcoin returns are a thing of the past. In 2021, she had 60% return. This is the smallest positive return since 2015.

led the way. Now, it’s time to get out of the way.

Who will lead the next decade?

The amazing thing about the type of chart that Billello and Carlson produce is that there is often a surprising winner. I have no idea what asset class will lead the way over the next decade, but I know that the big companies will always be in search of it.

Too big to calculate 82% of 506 of SPY’s holdings based on market value. Looking at Carlson’s chart, large companies have been in the top three asset classes for seven of the past 10 years. At Billello, the big hats only made it to the top three in 2019. However, his chart had 17 asset classes versus Carlson’s 11.

Therefore, as Bitcoin’s annual returns continue to shrink relative to these other asset classes, the world’s largest cryptocurrency becomes less exciting as a high-value asset and more attractive as a defensive maneuver in the same vein as gold.

However, the International Monetary Fund (IMF) recently threw cold water on this theory.

Here’s what the IMF has to say about it Investor Assumption:

“The correlation of crypto assets with traditional holdings such as stocks has increased significantly, limiting the advantages of perceived risk diversification and increasing the risk of contagion across financial markets,” Tobias Adrian and Mahfash Qureshi, two senior officials from the fund’s capital markets, wrote in their departments. Tara Iyer, an economist specializing in global financial stability, also contributed to the research, Politico mentioned.

Therefore, if there is no longer a rise in historical levels, no longer a hedge against inflation, etc., there does not seem to be any reason to hold the cryptocurrency.

Add to the argument that Bitcoin offers no benefit other than serving as an alternative currency, and the benchmark doesn’t look like a bad bet against Bitcoin over the next decade.

bottom line

In my May article on Bitcoin, I argued that increased regulation was a good thing for BTC-USD. After all, if it is to become an alternative to the US dollar, it should be able to withstand closer scrutiny by regulators.

Ultimately, I think Bitcoin will start to emerge more as a digital currency than a long-term investment. If that happens, you can be sure his days as a big mover are over.

Published in, Will Ashworth He did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, and are subject to Posting Guidelines.

Will Ashworth has written about investments full time since 2008. Publications he has appeared on include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger and many others in the US and Canada. He particularly enjoys creating model wallets that will stand the test of time. He lives in Halifax, Nova Scotia.