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Bitcoin’s rise in recent years has been marked by a high return on investment (ROI) that has eclipsed the major stock market indices over the same period.
Compared to the S&P 500, Dow Jones Industrials and Nasdaq over the past five years, Bitcoin has recorded an average ROI of 1645%, according to Finbold’s Bitcoin ROI tool.
The yield of the digital currency exceeds the yield of the Dow Jones index by 1978%. The return on the asset is also 1,734% higher than that of the S&P 500 index, which tracks the performance of the stocks of the 500 largest US companies. As for the Nasdaq, Bitcoin’s ROI has outperformed it by 1221%.
The Bitcoin ROI tool allows you to compare the return on investment (ROI) of BTC with traditional assets as a percentage, highlighting how much investment in cryptocurrency outperforms other financial assets over a period of time.
Bitcoin’s high returns partly confirm the notion that cryptocurrencies are an ideal vehicle for making high returns in a short period, given that the aforementioned traditional indices have been around for decades.
Over the past five years, both asset classes have experienced huge ups and downs, but Bitcoin has managed to stand out from the rest with its growth, which is mainly associated with the entry of institutional investors into the crypto space.
The growth trajectory of traditional assets was interrupted by the onset of the pandemic, which led to a massive stock market crash. At the same time, bitcoin suffered from regulatory uncertainty, which resulted in a historic collapse of the digital asset along with the entire cryptocurrency market.
Since the beginning of 2021, Bitcoin has shown several bull runs coupled with all-time high prices. As of press time, the asset is trading at $42,080, up more than 3,000% over the past five years.
And while bitcoin is increasingly correlated with the traditional financial sector, the main cryptocurrency and indices are two different asset classes. For example, indices track commercial companies that operate tangible products and services, while bitcoin is a virtual currency.
In the coming years, it will be interesting to see how bitcoin performs compared to traditional exchange-traded products as the two asset classes increasingly show correlation. It is also worth highlighting the correlation of bitcoin with the shares of US technology companies, which are tracked by the Nasdaq index.
The observed correlation allows us to perceive bitcoin as a reliable safe haven asset from rising inflation. Asset correlation is also strengthening along with the tightening of the US Treasury yield curve in an environment of high inflation.
On the other hand, rising volatility and correlation with traditional assets could reduce Bitcoin’s high returns. It is worth noting that over the past few months, volatility has equally affected both bitcoin and traditional assets.
In addition, the digital currency is becoming a diversification option as Bitcoin proponents expect the asset to be fully integrated into the traditional financial space.
Despite the volatility, bitcoin is now becoming a solid option for conservative investors, and traditional financial players such as banks are already offering services with BTC.
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