While the time period includes bitcoin’s 2017 peak, it also accounts for the crypto winter, which provides some balance. All told, the bitcoin price is up by a triple-digit percentage. Meanwhile, the Dow Jones Industrial Average has delivered, ahem, 26% returns in the same span. It’s not just the Dow. Bitcoin has outperformed the S&P 500 and oil, too, not to mention its chief rival as a store of value, gold. Even if bitcoin’s risk/reward ratio isn’t for everyone, it’s all about maintaining the right perspective.
“The non-correlated, asymmetric nature of bitcoin makes it imperative that every portfolio include some exposure to the digital currency,” said Pompliano using the hashtag “GetOffZero.”
Two year returns:
S&P 500: 19.9%
The non-correlated, asymmetric nature of Bitcoin makes it imperative that every portfolio include some exposure to the digital currency. #GetOffZero
— Pomp 🌪 (@APompliano) April 23, 2019
‘Volatility Is Required for Outsized Returns’
The stock market has generated impressive returns over the last couple of years, too. But nobody ever said the Dow was going to zero as they did about bitcoin. So the fact that the leading cryptocurrency’s returns have usurped the Dow’s is all the evidence that crypto investors need to silence the critics.
Bitcoin is a volatile asset, and its performance is erratic. As Fundstrat’s Tom Lee says, bitcoin’s annual gains tend to involve the 10 best trading days of the year. The Dow, which experienced its biggest one-day point gain (not percentage) ever of 1,086 points at year-end 2018, is boring by way of comparison. Bitcoin investors can stomach a much wilder ride. Just ask Softbank Group CEO, Masayoshi Son. The billionaire lost $130 million in a bitcoin bet gone wrong.
“Bitcoin’s volatility is what made it the best performing asset over the last decade. Volatility is a requirement for outsized returns.”
Getting Off Zero
The Morgan Creek Digital co-founder offers some anecdotal evidence that big investors are paying attention to bitcoin. Pompliano has observed a shift in sentiment among family offices. When asked by a follower in the Twitter thread if wealthy families are in fact “getting off zero,” he responded that “they’re getting there” and “plenty of folks are asking the right questions.”
I just spent 40 minutes in front of some of the wealthiest families in the world to explain Bitcoin.
They’re listening. Sentiment is changing.
— Pomp 🌪 (@APompliano) April 25, 2019
Bitcoin’s ascension to nearly a $10 billion market cap since its inception a decade ago has impressed even the most seasoned Wall Street veterans, including Morgan Creek CEO Mark Yusko.
Because never in my 30 yrs of managing capital have I seen an asset that delivers on promise of return enhancement & risk reduction through low correlation like #Bitcoin
— Mark W. Yusko (@MarkYusko) April 25, 2019
Click here for a real-time Dow Jones Industrial Average price chart.