Bitcoin has always been considered volatile. An investment management company has now found out that Bitcoin is in fact less volatile than many shares of the S&P 500 index.
Bitcoin’s Hodler knows that the price of their crypto-currency can take a tumble in a single day. Clever speculators take advantage of price changes for strong profits. But is Bitcoin really that volatile or is it just a distortion of perspective?
The global investment management company VanEck has got to the bottom of this question and come up with astonishing results.
Bitcoin and the S&P 500
VanEck compared Bitcoin with the shares included in the Standard & Poor’s 500. The S&P 500 is a stock index that tracks the 500 largest US companies listed on the stock exchange. The allocation within the index is weighted according to market capitalisation, so that the index provides a true-to-scale reflection of the companies. Overall, the S&P 500 is one of the most important stock indices in the world.
If one now compares Bitcoin and the shares in the S&P 500 over a 90-day period, it is clear that Bitcoin is less volatile than 112 of the shares included in the index. In fact, if the period considered is the past year, Bitcoin is less volatile than 145 of the shares in the S&P 500. In percentage terms, Bitcoin is generally less volatile than more than 20% of the shares in the stock index.
A surprise for many analysts and investors
Over the years, many people in international finance have advised against Bitcoin because of its alleged volatility or have gloated over it. In his blog entry, VanEck said
Although Bitcoin is a volatile asset, it will surprise many analysts and investors how many other large assets have been even more volatile than Bitcoin.
It went on to say:
Much of the volatility in recent years is due to the sensitivity of the small overall market size, regulatory hurdles and generally low penetration in mainstream equity and capital markets.
Bitcoin has already won
The current analysis is not the first evidence that an investment in Bitcoin can be more lucrative than in traditional shares. For example, the Reddit user with the pseudonym „u/Joe-M-4“ carried out an experiment on this. At the beginning of 2019 he will invest 1,000 USD in the ten most popular crypto currencies and another 1,000 USD in the S&P 500 share index.
The result is still in flux, but the crypto currencies together have increased by 54%. The S&P 500 is significantly behind (35%).