Bitcoin vs the S&P 500: Which Is a More Adventurous Investment?

A quick look at the annual performance of the S&P 500 and Bitcoin in the last decade shows that Bitcoin is a more adventurous investment.

2024 saw Bitcoin growing by 111%. One of the safest indexes, the S&P 500, showed 24% growth in 2024. Is Bitcoin a more adventurous investment? There are different takes on this claim.

A quick look at the annual performance of the S&P 500 and Bitcoin in the last decade

The S&P 500 is a stock market index that tracks the performance of 500 leading companies in the U.S. stock market. These companies usually comprise around ⅘ of the total market capitalization of U.S. companies.

The index includes giants like Nvidia, Apple, Microsoft, Meta Platforms, Berkshire Hathaway and others. The value of these companies grows consistently, earning the index a reputation for being a safe investment. However, some companies perform better than the index itself. For example, Berkshire Hathaway had a higher annual rate than the S&P 500 last year.

Bitcoin, on the other hand, had incredible ups and severe downs throughout this period, with the highest growth rate at 1,336% (2017) and the most significant downfall at 73% (2018).

The annualized total return for Bitcoin (2013–2023) reached 74.1% against the 13.3% rate by the S&P 500. The total return for the same period is 25,480% (Bitcoin) against 250% (the S&P 500), meaning that each dollar invested in BTC in 2013 brought 100x more money in 2023 than each dollar invested in the S&P 500.

Warren Buffett and Berkshire Hathaway beat the S&P 500 last year, but they got destroyed by bitcoin's performance. Investors who can think for themselves know bitcoin is the true benchmark, not the S&P 500. Eventually more investors will realize the change.

Is that a sheer victory of Bitcoin in the battle with the S&P 500? Well, the battle probably exists only in the crypto X threads. Rather, let’s take a look at the pros and cons of Bitcoin in comparison to the S&P index.

Bitcoin vs the S&P 500

Compared to the S&P 500, Bitcoin is considered a more adventurous investment. It spikes higher and drops lower than the S&P 500. For instance, if you invested in BTC in December 2017, you would have to wait over two years to regain your initial investment.

This higher volatility makes Bitcoin a riskier investment. BlackRock advises allocating only up to 2% of your money in Bitcoin to play it safe. Interestingly, some people view Bitcoin as a safer investment than the S&P 500. They argue that many S&P 500 proponents overlook the factor of inflation. During the 1970s, the S&P 500 was not performing well at all as the inflation rate surpassed the returns rate. Another “dark” period occurred in the 2000s. However, in other periods, long-term investment in the S&P 500 proved to be safe.

Compared to the S&P 500, Bitcoin has shorter periods of both negative and positive annual returns. This characteristic makes it a preferred choice over the S&P 500 for safety, as Bitcoin investors may experience periods where the returns dramatically outpace the inflation rates and the chart pits get passed over within these periods.

Another downside of the S&P 500 index that critics point out is that instead of investing in a successful company, you buy 500 companies, some of which will drag the index performance down (that’s the reason why certain companies have higher returns than the index itself). At the same time, the growth of some of these companies is explained by the respective growth of the money supply.

Research by mathematicians Aubain Nzokem and Daniel Maposa shows that Bitcoin has a nearly 40% higher prevalence to create daily returns than the S&P 500, while the value-to-risk rate is four times higher for Bitcoin.

Overall, it can be said that the S&P 500 has consistently beaten the inflation rate recently, thereby fulfilling its main purpose of preserving the value of money. Will it ever go to the moon? Well, probably not, as the very structure of this index dictates that you invest in companies that will eventually underperform at some point, averaging out the returns.

Bitcoin, on the other hand, has shown the ability to skyrocket and crash all the time. It has been declared dead many times,