Bitcoin Yielded 93.8% of Annual Return, But Still Risky?

Updated: Jan 13



The largest cryptocurrency in the world yielded higher yearly returns than gold and S&P 500, with a banging 93.8% rise in value. According to SFOX’s recent cryptocurrency volatility report, BTC was a great buy in 2019. That’s despite the constant ups and downs, and critics.


Bitcoin Ended 2019 With Above $7,000 YOY

Return


During the past six months, Bitcoin displayed a low correlation index compared to traditional assets like stocks and gold. Not only that, the correlation between Altcoins and Bitcoins also retreated from as high as 0.7 to as low as 0.4.

In addition, the SFOX report states, “At the beginning of 2019, a trader could only buy 1 BTC for $3710.15.”

Despite Bitcoin’s many critics, it ended 2019 with more than $7,000 year-on-end returns. This amount is higher when compared to other asset classes.


As we enter 2020, it will not hurt to keep in mind that the cryptocurrency industry is known for its characteristic to change like the speed of light. Though gold held a 7-year high, Bitcoin is currently trading about $8,200, which is a remarkable price surge.


After all, BTC may appear correlated to gold and other commodities during global uncertainty. The recent global geopolitical tensions between the US and Iran can be proof.


SFOX concluded that the combination of low correlation and low volatility made Bitcoin a compelling tool in the previous year’s portfolio management. On the other hand, the prime cryptocurrency dealer also highlighted that the report isn’t large to make any meaningful trading predictions this 2020.


Bitcoin Shows Disproportionately Risks Despite Being the “Excellent Buy” In 2019


Compared to the gold’s 52.8% and S&P 500’s 29%, the YOY returns of BTC is really far higher, with 93.8%. However, as the lower volatility equivalents to an impressive market maturity increase, the risks remain larger than the rewards.


Using the Sharpe ratio, which is a risk-reward measure comparing the returns of an asset with its volatility, the S&P 500 held a significantly higher result. The Bitcoin’s ratio’s value amounted to 1.74 in the previous year, while the result for the leading stock market revealed a 2.54 ratio’s value. This translates that despite the significantly lower returns of the traditional markets, they are still a more profitable investment compared to cryptocurrencies.

Based on the recent crypto sector’s market cap, Tim Enneking, SFOX crypto fund manager, observes that “There are tens, if not hundreds, of funds on the planet that – ignoring the fact that they’d drive the price up – could buy the entire crypto sector.” This translates that crypto might remain not as huge as an asset class for the major institution’s involvement.

Overall, the trends remain unknown this 2020. additionally, SFOX also announced the upcoming BTC halving along with the options contracts’ introduction being the potential drivers. There are plenty of trends coming up, not to mention, the YouTube content ban can be a sign of new pressure from the tech companies.

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