Bitcoin’s 5-Year Returns Dwarf Major Bank Stocks’ Returns By Over 500% Despite Crypto Winter
Bitcoin’s (BTC) volatility continues to stand out in 2022, with the cryptocurrency recording significant selling as it attempts to navigate the high-inflationary macro environment that has also affected other traditional asset classes such as stocks. Despite Bitcoin’s volatility, the asset has recorded astronomical rates of return over the long term, dwarfing other asset classes.
Data obtained from the Finbold ROI tool indicates that Bitcoin’s five-year return on investment has outperformed the shares of five leading banks by an average of 549.35%. In particular, the crypto has the highest return against Citi (NYSE: C ) at 839.17% and Wells Fargo (NYSE: WFC ), which stands at 728.34%.
Elsewhere, Bitcoin returns against Goldman Sachs (NYSE: GS ) at 407.46% followed by JPMorgan (NYSE: JPM ) at 402.06%. Bank of America (NYSE: BAC ) ranks fifth among the top five bank stocks, with Bitcoin returns 369.75% higher. In particular, the percentage values indicate how much a five-year Bitcoin investment outperforms traditional banks’ stock ROI.
Bitcoin dwarfs bank stocks
It is important to note that Bitcoin and the highlighted stocks belong to different asset classes. The shares have an underlying company with assets, and their success largely depends on the bank’s performance. However, Bitcoin is not backed by any hard assets and its price is influenced by speculation driven by market sentiment.
Bitcoin’s performance can also be considered a surprise since the flagship cryptocurrency is taking on financial institutions that have been around for decades while the asset is just over a decade old. Not only has it outperformed the banks in returns, but Bitcoin has also not failed in its market value.
However, due to its extreme volatility, Bitcoin has seen its capitalization plummet from over $1 trillion at its peak, as well as being ranked among the top ten most valuable assets in the world.
Following the unprecedented growth of Bitcoin, some of the featured banks have been forced to embrace cryptocurrencies as a growth strategy alongside tapping into the digital asset market. Big banks like Citi are building teams dedicated to cryptocurrencies and the underlying blockchain technology.
Based on how the regulatory aspect develops, some banks are estimated to allow customers to invest in Bitcoin directly. In such scenarios, both parties are likely to emerge as winners since the value of their shares will rise and Bitcoin will benefit from the institutional effort. Part of the development has resulted in some banks using the services of crypto depositories.
Bitcoin and stock correlation
In addition, despite belonging to different asset classes, Bitcoin and stocks have shown a strong correlation in recent months. Both assets have correlated due to the prevailing market conditions characterized by high inflation and the Federal Reserve’s tightening measures led by interest rate increases.
As Bitcoin matures, the correlation sets up a perfect scenario to monitor how the two asset classes will perform in the future. At the same time, the correlation may be a result of Bitcoin’s growing narrative as a store of value asset class along with ongoing adoption in various jurisdictions.
At the same time, even though Bitcoin is a volatile asset, many stock investors incorporate both assets into the same portfolio. Bitcoin’s performance has driven exponential adoption of cryptocurrencies as a new asset class gaining an allocation in investors’ portfolios. In general, the inclusion in the same portfolio is partly due to the ability of cryptocurrencies to offer exponential profitability over a short period of time.
Based on the current market conditions, the stocks mentioned above have the upper hand in rising higher compared to Bitcoin by taking into account elements such as regulations. In particular, the stock market is better regulated, while Bitcoin still faces battles from the regulatory side in addition to the volatility aspect.
Disclaimer: The content of this page should not be considered investment advice. Investment is speculative. When you invest, your capital is at risk.