Bitcoin vs. Traditional Assets (2024)

Bitcoin has taken the world by storm in the last decade. While the cryptocurrency has seen some significant spikes and drops, it’s proven to be a lucrative investment for many.

In fact, Bitcoin was thebest-performing asset of the decade, returning ten times more than the NASDAQ 100. So, does this mean you should say goodbye to traditional assets and funnel all of your investment money into Bitcoin? Or should you stick with traditional assets because they’ve proven the test of time?

Before deciding how to allocate your investment portfolio, it’s crucial to understand how Bitcoin stacks up against traditional assets like real estate, stocks, and gold. Read this guide to learn about Bitcoin vs. traditional assets.

As we mentioned above, Bitcoin was the best-performing asset of the decade. The data examined the 17 top-performing assets between 2011 and 2021 and found that since 2011, Bitcoin’s cumulative gains have exceeded 20,000,000%. This far outpaced the gains of the US Large Caps and NASDAQ 100, which recorded returns of $3,282 and 541%, respectively.

Bitcoin returned 230% on an annualized scale in that period. This is 10x the amount of the NASDAQ 100, which was the second-best performing asset class of the last decade. US Large Caps recorded an annualized return of 14%, and gold recorded an annualized return of 1.5%. Even though Bitcoin is very volatile, there’s no denying that it’s an asset worth holding onto for many investors.

Before you dive headfirst into Bitcoin, let’s look at some of the pros and cons associated with this asset.

The New York Stock Exchange (NYSE), which is arguably the most powerful stock exchange in the world, was founded in 1792 and formally constituted as the “New York Stock and Exchange Board” in 1817. Since the inception of the stock exchange, stock ownership has built a lifetime of prosperity for many people. However, with the rapid appreciation of Bitcoin, many investors are reconsidering the allocation of stocks in their portfolios.

Stocks represent a fractional ownership interest in a business. If you hold one or more shares in a company, you own part of the company or a share in its capital. Stock prices move as investors assess the potential success of a company. When stocks rise over time, it’s due to the underlying success of the company. In other words, for a stock to be a successful investment, the underlying company needs to perform well over time. While stocks are backed by the assets and cash flow of a company, Bitcoin isn’t backed by any hard assets. (However, some other cryptocurrencies, known as stablecoins, are backed by hard assets).

When the price of Bitcoin moves, it’s due to speculation driven by market sentiment. As the sentiment changes, prices shift – sometimes drastically. In other words, Bitcoin is driven by the hope that someone will buy it for a higher price in the future. For Bitcoin to be a successful investment, you need to get someone to buy it for more than you paid. Stocks have a long history of solid returns, they have intrinsic value, are accessible, and have stronger regulations than Bitcoin. So, why would you allocate money toward Bitcoin instead of stocks?

While Bitcoin is volatile, it has the potential for extremely high rewards. For example, aFinbold report from February 2022 found that Bitcoin outperformed the top six tech stocks over a 30-day period, with an average ROI of 12.24%. Bitcoin investing is straightforward and secure, and digital asset platforms, such as SMART VALOR can help get you started.

To put this into perspective even further, if you had invested $100 in Netflix a decade ago, you’d see a return of about $4,011. On the other hand, if you had invested $100 in Microsoft over the same period, you’d only be seeing a return of about $1,312. However, had you invested in Bitcoin, you’d have seen a return of over $18 million by now.

In addition, we are seeing a strong upward trend in Bitcoin: El Salvador recently introduced the cryptocurrency as legal tender and Tesla announced in March 2021 that it would accept Bitcoin as a payment option. While the company has stopped this in the meantime, it intends to accept Bitcoin payments again once some investigations have been completed. Tesla also holds around 43,200 BTC, currently worth almost $1.7 billion.

Although we don’t recommend completely eliminating stocks from your portfolio, allocating some of your money to a high-risk, high-reward asset like Bitcoin can be fruitful over time.

Bitcoin vs. Gold

Gold is an asset that’s proven to hold value over long periods of time, and many investors have used it to hedge against market turndowns. While Bitcoin is a young investment compared to gold, many investors use the crypto asset to hedge against recessions and corrections.

Gold is one of the rarest metals, and Bitcoin is rare compared to other cryptocurrencies, as it has a supply limit of 21 million. Although Bitcoin and gold share some similarities, there’s no denying that Bitcoin has outpaced gold in terms of ROI.

While Bitcoin finished lower than expected at the end of 2021, it outperformed gold for the third year in a row. Bitcoin was up 70% by the end of 2021, while gold was down 7%.

Had you invested $1 in Bitcoin when it first came on the market over 12 years ago, you’d be seeing a return of approximately $6.258 million. On the other hand, if you invested that same $1 in gold, you’d see a measly return of $1.69.

While real estate doesn’t have the same historical high returns as stocks, it’s a tangible asset with intrinsic value. Despite the initial high costs and maintenance requirements, real estate lends itself to multiple investment opportunities, and it’s a regulated asset that can lead to long-term returns.

However, Bitcoin costs significantly less to invest in than real estate, and it doesn’t come with continual maintenance requirements. And, if you look at the last five years, investing in Bitcoin yielded higher returns than investing in real estate. For example, the Manhattan market has seen a home price drop of 31%. If you invested in a down payment in 2017 and want to sell, you could be eating losses of around $450,000.

On average, home prices appreciate about 3% each year. So, in the best-case scenario, let’s say you put 20% down on a $300,000 home five years ago. At an average appreciation rate, you’d be selling the home for $347,782, making a profit of $47,782 and seeing an ROI of 79.64%.

However, had you put that down payment toward Bitcoin five years ago, you’d be seeing a total return of 3,112% and an ending value of approximately $1,927,664.00.

While Bitcoin is a volatile asset, it has astronomical return rates, as you can see from the examples above. It’s also becoming more popular as a transactional currency as more and more companies are starting to accept Bitcoin as a form of payment.

If you’re willing to hold onto your Bitcoin and wait out the market fluctuations, you can see much bigger returns than real estate, stocks, and gold combined, as the past has shown.