Bitcoin is emerging as a popular diversification asset in balanced investment portfolios. But the digital currency’s non-correlation with traditional assets is not the only reason why investors are adding it to their portfolio. Historically, Bitcoin has outperformed stocks, suggesting that holding the digital gold could add to overall portfolio returns.
But how has Bitcoin performed against Bitcoin stocks? Read on to find out.
Bitcoin vs. Stocks
To see how Bitcoin (BTC) has performed against the stock market, let’s look at the performance of Bitcoin in the last five years and compare it to the returns generated by the S&P 500 Index and the MSCI World Index.
At the time of writing, the S&P 500 Index is trading at 4,701.46, which represents a 114% five-year return for US stocks.
During the same time period, Bitcoin generated a return of 7,447%.
The table below shows the percentage returns of the SP 500 Index and BTC/USD covering a five-year, three-year, and one-year period (with November 26, 2021, as the end date).
|Return (%)||Return (%)|
As you can see, Bitcoin has outperformed US stocks in all three time periods, making a strong argument for adding the digital currency into your portfolio to add alpha.
Looking at the MSCI World Index, we see a similar picture.
The MSCI World Index, which captures the performance of large and mid-cap stocks across all 23 developed markets, has also substantially underperformed bitcoin.
The MSCI World Index is currently trading at 3,185.22, which marks a 86% five-year return.
|MSCI World Index||BTC/USD|
|Return (%)||Return (%)|
As you can see in the comparison table above, global equities have performed even worse than US equities, highlighting that Bitcoin cannot only add potential returns to US portfolios but global portfolios as well.
Now that we’ve looked at Bitcoin’s performance versus the overall stock market, let’s see how Bitcoin has performed compared to Bitcoin stocks.
Bitcoin vs Bitcoin Stocks: Here are the Numbers
Before we dive into the numbers, let’s briefly define what we mean by Bitcoin stocks.
Bitcoin stocks are shares in publicly traded companies that are involved in the development or deployment of Bitcoin products and services. Most public Bitcoin companies are active in the Bitcoin mining industry.
For our analysis of Bitcoin companies stock performances, we have chosen Square, Coinbase, Nvidia, MicroStrategy, Canaan, Riot Blockchain, Hive, Northern Data, and Bitfarms.
The table below shows a brief description of what each Bitcoin company does and illustrates the five-year, three-year, and one-year performance of their stocks.
|Company Profile||Return (%)|
|Square (SQ)||Square is a financial services and digital payments company that operates the Cash App, which supports the buying and selling of Bitcoin. Square is listed in the NYSE exchange under the ticker SQ.||13%||209%||1,551%|
|Coinbase (COIN)||Coinbase is one of the largest US-based crypto exchanges. Founded in 2021, the San Francisco-based company started trading publicly on NASDAQ under the ticker COIN in April 2021.||-5% (*since IPO)||n.a.||n.a.|
|Nvidia (NVDA)||Nvidia is a GPU provider for the gaming and crypto mining space. Founded in 1993, the US-based company trades on NASDAQ under the ticker NVDA.||146%||700%||1,378%|
|MicroStrategy (MSTR)||MicroStrategy is a business intelligence and analytics provider. The company adopted a bitcoin strategy where it gradually purchased 108,000 BTC since mid-2020. The bitcoin reserves held by the company is now worth over $6 billion. MicroStrategy trades on NASDAQ under the ticket MSTR.||158%||440%||265%|
|Canaan (CAN)||Canaan is a Beijing-based company founded in 2013 that provides ASIC hardware solutions for Bitcoin miners. Canaan trades publicly at the NASDAQ exchange under the ticker CAN.||n.a.||n.a.||8%|
|Riot Blockchain (RIOT)||Riot Blockchain is a Bitcoin mining company based in Colorado. Riot is listed on NASDAQ under the ticker RIOT.||492%||1,889%||814%|
|Hive Blockchain Technologies (HIVE)||Hive Blockchain Technologies is a Vancouver-based company that operates a cryptocurrency mining farm. The company was the first publicly traded crypto mining entity to list on the Toronto Venture Exchange in 2017. It trades under the ticker HIVE.||426%||1,617%||5,050%|
|Northern Data (NB2)||Northern Data AG is a Frankfurt-based company that provides bitcoin mining services and hardware to miners. The company is listed in the FTSE 100. It trades under the ticker NB2.||55%||378%||n.a.|
|Bitfarms||Bitfarm is a Toronto-based blockchain company that operates one of the largest cryptocurrency mining operations in North America. Founded in 2017, the company is listed on NASDAQ under the ticker BITF.||1,470%||n.a.||n.a.|
Our analysis shows that Bitcoin outperforms our set of Bitcoin stocks over a five-year period and performed better than most over a three-year period.
In the short-term, a handful of Bitcoin stocks outperformed Bitcoin, namely Riot Blockchain, Hive, and Bitfarms, which have booked 492%, 426%, and 1,470% returns in the last twelve months.
Should You Invest in Bitcoin or Bitcoin Stocks?
Despite impressive price gains on select Bitcoin stocks, Bitcoin has outperformed all publicly traded Bitcoin companies over the long run, highlighting the digital gold’s high returns potential.
However, that doesn’t mean that you can’t outperform the digital currency in the short and medium term by picking the right Bitcoin stocks.
The shares of Riot Blockchain, Hive, and Bitfarms have outperformed the price of Bitcoin in the past twelve months, and both Riot and Hive also outperformed Bitcoin on a three-year basis.
What’s important to consider when choosing between adding Bitcoin or Bitcoin stocks to an investment portfolio, however, is that the prices of Bitcoin stocks are influenced by company-specific factors and the overall performance of the stock market. That means you are taking on additional risks by purchasing Bitcoin stocks as opposed to buying Bitcoin outright.
What’s more, the price of Bitcoin moves largely independently from traditional asset classes, which adds the bonus of diversification with a non-correlated asset to a balanced investment portfolio.
Investors who are considering purchasing Bitcoin stocks as a proxy for Bitcoin exposure in their portfolio could instead purchase an exchange-traded investment vehicle that tracks the price of Bitcoin, such as the Iconic Funds Physical Bitcoin ETP.
Through the purchase of a Bitcoin ETP, investors can add Bitcoin to their portfolios without having to manage the idiosyncratic risks that come with holding Bitcoin stocks.
About Iconic Funds
Iconic Funds is the bridge to passive and actively-managed exposure to crypto. The asset manager, via its subsidiaries, offers crypto asset ETP’s, diversified index funds, and alpha-seeking strategies for investors.
Iconic Funds’ mission is driving the adoption of crypto assets. As the bridge for investors to gain exposure to Crypto Assets, Iconic’s licensed and regulated vehicles offer investors a menu of investment choices ranging from passive index exposure to actively-managed strategies. Iconic Funds removes the technical risks of crypto investing by offering investors trusted and familiar means to invest in crypto at industry-leading low costs.
The marriage of state-of-the-art technology, innovative investment products, and uncompromising professionalism places Iconic at the vanguard of crypto asset management.
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