Although Bitcoin is a relatively new asset class, the cryptocurrency’s return on investment is significantly higher, dwarfing other traditional products. The growth has seen Bitcoin outperform some of the established banking sector stocks by significant margins.
According to data acquired and calculated by Finbold, Bitcoin’s return on investment over the past five years has outperformed five leading banks’ stocks by 4,214% on average. The cryptocurrency has outperformed Wells Fargo (WFC) by a whopping 7,151.86%. Compared to Citigroup (C), Bitcoin ROI is higher by 4,951.47%, while Goldman Sachs (GS) ranks third at 3,101.94%.
Among the highlighted asset classes, Bitcoin also controls a higher market capitalization of $813.56 billion as of September 21. JP Morgan (JPM) ranks second with a market cap of $471.17 billion. The data on ROI performance is provided by Finbold’s Bitcoin ROI tool.
How Bitcoin has managed to outshine banking stocks
Bitcoin has outshined the stocks for traditional banks that have been in existence for decades highlighting the digital currency’s impact and role in the financial world and the potential it holds for investors. Worth noting is that Bitcoin and the banks belong to a different asset class. The banks are for-profit businesses companies controlling tangible products and services while Bitcoin is a virtual asset.
Furthermore, despite Bitcoin commanding a significant return on investment, the selected banks hold a superior position with trillions of assets under management. The banks also pay a dividend based on stock performance, while Bitcoin returns are from rise in demand and value.
Bitcoin’s returns can significantly be attributed to the cryptocurrency’s rise in popularity and value recorded early this year. Bitcoin recorded an influx of institutional investors driving the price to hit an all-time high of $64,800 in mid-April. Despite short-term corrections, the asset has to a large extent sustained the gains made.
On the same line, Bitcoin has outperformed the banks’ stock despite suffering a significant share of negative press over the last five years. Notably, the asset has been hit by volatility alongside a hostile regulatory environment from most jurisdictions. The regulatory hurdle has mainly been emanated from the asset’s ability to aid vices like money laundering.
The Bitcoin returns can also be a signal that the cryptocurrency market has been maturing over the last five years, and the entry of institutions is the most significant indicator of this growth. Bitcoin proponents maintain that the entry of institutions will potentially lower the volatility concern.
Additionally, the gains might be a reflection that the asset is emerging as a formidable hedge against inflation and a store of value. Amid the coronavirus pandemic, stocks plunged and while most economies went into recession and central governments embarked on wide-scale printing of money and Bitcoin was viewed as a hedge against monetary debasement.
Relationship between bank stocks and Bitcoin
Interestingly, amid the rise in the value of Bitcoin, some of the traditional banks are also launching investment products around the asset. The shifting mainstream status has been motivated by increased customer demands for crypto products.
For instance, Citigroup announced in August that it was considering offering Bitcoin futures for some institutional clients. Notably, this approach has resulted in the form of a symbiotic relationship between traditional entities and Bitcoin. Historically, when traditional banks show interest in Bitcoin, the asset has risen in value and vice versa.
Furthermore, like Bitcoin, the bank’s stock has had a mixed stock price movement over the last five years. Notably, the stocks have been rising over the years before crashing in 2020 due to the pandemic. However, with the reopening of the economy, the banks benefited from the overall stock market resurgence.