The year 2024 saw Bitcoin grow by 111%. One of the safer indexes, the S&P 500, showed 24% growth in 2024. Is Bitcoin a more adventurous investment? There are different opinions about this claim.

A quick look at the annual performance of the S&P 500 and Bitcoin over the past decade

The S&P 500 is a stock market index that tracks the 500 best-performing companies in the U.S. stock market. These companies typically cluster around ⅘ of the market capitalization of US companies.

Nvidia, Apple, Microsoft, Meta Platforms, Berkshire Hathaway and other giant companies are the core of the S&P 500. The value of these companies is constantly growing, which has earned the index a safe investment reputation. The individual performance of some of these companies exceeds the performance of the entire index. For example, last year Berkshire Hathaway saw a higher annual rate From the Standard & Poor's 500.

Bitcoin has seen amazing highs and sharp declines throughout this period, with the highest growth rate of 1,336% (2017) and the most significant decline of 73% (2018).

Bitcoin's annual total return (2013-2023) was 74.1% versus a rate of 13.3% for the S&P 500. The total return for the same period is 25,480% (Bitcoin) versus 250% (S&P 500), meaning that every dollar invested in... BTC in 2013 brought in 100 times more money in 2023 than all Dollar invested in Standard & Poor's 500.

Is this a major victory for Bitcoin in the battle with the S&P 500? Well, maybe the battle is only in the X crypto chains. Instead, let's take a look at the pros and cons of Bitcoin compared to the S&P.

Bitcoin vs S&P 500

Bitcoin is more adventurous than the S&P 500. Bitcoin rises higher and falls lower than the S&P 500. If you invested in BTC in December 2017, you would have to wait more than two years to get back what you invested.

More adventure means more risk. BlackRock recommends investing only up to 2% of your money in Bitcoin to play safely. Interestingly, some believe that Bitcoin is a safe investment and a safer investment than the S&P 500. They point out that inflation is a factor that many proponents of the S&P 500 have missed. In the 1970s, the S&P 500 It wasn't safe Not at all because the rate of inflation was exceeding the rate of returns. There was another "dark" period in the 2000s. However, in other periods, long-term investing in the S&P 500 has proven to be safe.

Bitcoin has shorter periods of negative annual returns and shorter periods of positive returns. This metabolism makes it a preferable choice over the safe-haven S&P 500, as within five years Bitcoin investors may see returns significantly outperform inflation rates and chart pits are overtaken during these periods.

Another downside to the S&P 500 that critics have noted is that instead of investing in a successful company, you are buying 500 companies, some of which will underperform the index (which is why some companies have higher returns than the index itself). At the same time, the growth of some of these companies is explained by the growth of the money supply.

Search Mathematicians Opin Nzokem and Daniel Mabusa show that Bitcoin has a roughly 40% higher spread to generate daily returns than the S&P 500, while the value-to-risk ratio is four times higher for Bitcoin.

Overall, it is safe to say that the S&P 500 recently has been consistent in beating the rate of inflation and thus serves its main purpose of preserving the value of money. Will he one day go to the moon? Well, maybe not because the structure of this index assumes that you invest in companies that will underperform at some point and average returns.

Bitcoin, on the other hand, shows the ability to rise and fall all the time. Ironically, he was considered dead several times, each time at a new height. Therefore, Bitcoin can serve as a testing ground in a portfolio covered by more “stable” investments such as the S&P 500.