The worst investment strategy is no investment strategy. No matter what generation group you are a part of, there is never a bad time to educate yourself on potential investments. We’ve all heard the timeless phrase “don’t put all of your eggs in one basket.” In terms of finance, this strategy encourages one to spread their money throughout various types of investments and stresses the importance of a well-diversified portfolio in any market condition. With that in mind, let’s pit Bitcoin vs the stock market to help you better diversify your portfolio.
Bitcoin vs The Stock Market: Before We Begin
Cryptocurrency is not new, but that doesn’t mean it’s not new to you, specifically. When Bitcoin was introduced as a digital currency in 2009, it was worth $0. A year later, when early adopters began to trade Bitcoin it was worth a fraction of a cent. Then, jumping forward to 2011, Bitcoin hit the level of $1 for the first time ever. Since then, while the price has fluctuated considerably, over time the price has increased dramatically.
Before we proceed, please note that this article, while not meant to provide anyone with financial advice, is meant to educate the reader on Bitcoin’s historical growth performance and how that compares to the performance of select, high-profile blue-chip stocks.
Before Bitcoin’s initial existence and subsequent rise, the stock market had been the primary platform of choice for people who want to grow their asset portfolios. Once Bitcoin emerged and grew in value, it demonstrated comparable potential and volatility to some well-known stocks. Many investors began to look to cryptocurrency as an addition to and, for some as a substitute for investment in stocks. Many previous studies have shown that diversified portfolios perform better, meaning that portfolios containing cryptocurrencies like (but not limited to) Bitcoin, have the potential to possibly outperform portfolios that are crypto-free.
Differences Between Bitcoin and Stocks
In our past blogs, we’ve done multiple comparisons between Bitcoin and gold. Now, we’re going to expand this comparison to some select stocks. Not just any stocks, but some of the most popular stocks on the market including oft-cited stock groupings like Facebook, Amazon, Apple, Netflix and Google (FAANG), and Facebook, Apple, Microsoft, Google and Amazon (FAMGA), as well as the S&P 500. These stock groups are so large that without their positive performance, the performance of the stock markets would have gone from a positive to a negative during the prime COVID time period.
Now, let’s compare and contrast the performance, value, and growth of each. To start, here is a breakdown Q&A of the two asset classes:
|Scarcity?||Yes||Depending on the charter, you can add to, reduce, or split|
|Is the supply limited?||Yes. Only 21 million BTC||Companies can always issue more stock|
|How hard is the asset to fake?||Virtually impossible. Independently verifiable by blockchain||Verified by companies, but require significant auditing|
|Portability? (Can you use or transfer the asset anywhere?)||Yes||Not exactly. Stock traders have very specific licenses (Generally can’t use stocks outside of the stock market.)|
|Decentralized?||Yes. (no single person or group has control—rather, all users collectively retain control.)||No. (All stocks come from a single company and are often held by controlling shareholders.)|
|Divisibility? (Can one unit of this asset be divided into smaller quantities?)||Yes. 100,000,000 satoshis in one bitcoin.||Not usually. Sometimes, if a company partakes in a stock split, you can.|
|Durability? (Is this asset protected in the long-term?)||Yes. Since BTC is a digital asset, it will not deteriorate.||Stocks rely and are predicated on company longevity and activities.|
|Fungibility? (Can you trade this asset for other goods or assets?)||Yes. You can use BTC as a form of payment for some items at this time.||Sort of. You can cash in or out, but can’t typically use stocks to pay for goods.|
|User-friendly / Awareness||Awareness has been on the rise this year. But with only a 10-11 year history, its general knowledge still has a long way to go.||Even though it has been around for centuries, only a small percentage of the world’s population deals with stocks.|
How Your Cash Grows in Bitcoin vs Stocks
Now, let’s talk about your money. We’re all learning how to invest our own cash and make it grow the best we can, right? Let’s say you invested $1,000 each into Bitcoin, Facebook, Apple, Google, Microsoft, Amazon, and Netflix on 6/25/20. What would your investment have grown to by now? The answer for each asset is different, of course. Looking at the chart below, you will readily see that Bitcoin’s ROI is significantly higher than that of all of the listed premium stocks. While the prices of each of these assets can be expected to fluctuate on a day-to-day basis, this is one example that shows Bitcoin’s competitiveness as an investment option, even when Bitcoin is in a dip in value.
If You Invested $1,000 on 6/25/2020 In…
|Asset / Stock||Year-to-date Growth % (6/25/20-6/25/21)|
|Asset / Stock||$ Dollar Worth $ (6/25/21)||ROI Gain from $1,000 investment (6/25/20-21)|
Bitcoin vs Stock 10 Year Comparison
Now let’s take a side by side look at Bitcoin’s performance in the 10 years since its inception when compared to the S&P 500. The chart below shows each asset’s yearly growth percentage, along with the open and close value of each asset from the year 2010 through 2020/21.
|Years (2010-2021)||BTC Yearly Growth %||S&P 500 Yearly Growth %|
It is clear that none of these celebrated aggregations of stocks have grown the way Bitcoin has. All of the tables above show that overall, the leading cryptocurrency stands out as a long-term investment leader against some of the best, heavyweight stocks on the market. Now that you’ve seen and have a better understanding of Bitcoin’s history, growth, and performance, do you intend to make it part of your future – if you haven’t already? Put your cash to work for you by buying Bitcoin with cash at a Bitcoin ATM!
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