Last Updated on 19/03/2024 by Carl-Peter Lehmann
Ever wondered how Bitcoin stacks up against the traditional assets of the investment world? We first read about this on Visual Capitalist and thought it would be fun to share. Now we’re not advocating investing in bitcoin by posting this piece but simply sharing information we think is interesting. And because Bitcoin remains quite controversial (despite all the new Bitcoin Exchange Trade Products that were recently launched in the US) – with esteemed folk like Warren Buffett and Jamie Dimon believing it worthless – it’s a great conversation piece. If nothing else, these new products will make it a lot more accessible, and could lead to a lot more institutional adoption in everything from pension funds to sovereign wealth funds. It also probably won’t be long until a Bitcoin ETF is launched in South Africa.
The Great Thaw: Bitcoin’s 2023 Surge
Remember the crypto winter? It’s history now! In 2023, Bitcoin caught fire again, soaring an eye-watering 156% (still modest by its own historical standards). And well below the gain in shares like Nvidia which saw a parabolic 200% plus price appreciation. This wasn’t just a win for Bitcoin enthusiasts—it was a massive leap, marking its best performance since the golden days of 2020 (and after a horrendous 2022). The excitement around the introduction of 11 Bitcoin ETFs played a significant role, promising to usher in a wave of accessibility for investors far and wide.
Further Reading: 5 Pieces of Critical Financial Investment Advice You Can’t Do Without.
The Numbers Game: Bitcoin vs. The World
Let’s get down to numbers. How does Bitcoin compare with the usual suspects like stocks, bonds, and gold? Here’s a snapshot that throws light on the volatility and vigor of Bitcoin’s performance:
Bitcoin: The star of the show with a 156% jump in 2023, bouncing back from a 65% dip the previous year.
S&P 500: The steady climber, up 25% in 2023, outdoing its own average, thanks to an AI-fuelled recovery after a horrible 2022.
HY Corporate Bonds & Gold: Not to be overlooked, both offered a solid 12% return.
Emerging Markets: They had their moments too, showing resilience and growth, despite ongoing weakness from China.
Commodities: A mixed bag, but an essential player in the diversified portfolio game.
Bitcoin’s dance on the high wire of risk assets saw it soar with the winds of change, particularly with whispers of Federal Reserve rate cuts and the buzz around the 2024 halving event—a seismic shift that cuts the mining reward by half, potentially tightening supply if the demand keeps its pace.
A Decade in Review: Bitcoin's Unprecedented Returns
Zooming out, Bitcoin’s trajectory since 2013 is nothing short of breathtaking. From a staggering 5,516% spike in 2013 and 1300% move in 2017, to the lows of 2018 and 2022 that followed, it’s been a journey of epic proportions, averaging a 671% annual return over the last decade. The ride from obscurity to a $1 trillion asset class has been quite the journey. For those that got in early (and stayed the course), returns have been life changing. Clearly, expecting those returns to happen going forward is not realistic, simply due to the law of large numbers. But will the likes of Tom Lee and Cathie Wood be right who see a future Bitcoin price of anything from USD 500,000 to USD 1 million? The halving event in April see many Bitcoin enthusiasts predicting BTC at USD 100,000 plus before long so let’s first see how that works out.
Further Reading: 10 Shares That Could Accelerate Your Journey to Financial Independence
Carl-Peter Lehmann
Carl-Peter is a Director and Partner at Henceforward with over 20 years experience. He is an investment enthusiast who dabbles in Bitcoin in his personal capacity.
