The Standard & Poor's 500, commonly abbreviated as the S&P 500, is a collection of the 500 best-performing stocks in the US market. Seen as a key indicator of US and the performance of the large cap universe, the S&P 500 is the most accurate way to assess the health of the US stock market on a day to day basis.
Proponents of the S&P 500 have seen regular, demonstrable return on their investment strategy since its inception in 1928, with the benchmark group of stocks as a whole experiencing a 9.8% return on investment, according to LPL financial data recently published by CNN. While a near 10% return may seem generous in terms of stock market ROI, it pales in comparison to the astronomical returns offered by cryptocurrency investment.
The highly lucrative practice of cryptocurrency investment- specifically Bitcoin– has made overnight millionaires, and is revolutionizing the entire financial industry. How does Bitcoin compare to the S&P 500, however? In this article, we’ll see how the crypto king measures up to traditional large cap investment and help you make an informed decision regarding your investment portfolio.
The Meteoric Rise Of Bitcoin
Bitcoin has only been available for an incredibly short amount of time compared to the S&P 500, but in that short timespan has dramatically multiplied in value. The S&P 500 has been a key axiom of the stock market for almost 90 years, whereas Bitcoin has been present for a scant eight years or so.
The obscure nature of Bitcoin’s beginnings make finding conclusive pricing information difficult. Through forensic analysis, however, it’s possible to observe a sharp rise in the value of the currency from July 2010 onward. The first concrete pricing data for Bitcoin marks it at roughly $0.05 per coin halfway through 2010.
Compare that to the current price of Bitcoin, which at the time of this report has been fluctuating between $3,800 and $4,100 USD on a daily basis, and it’s easy to see how crypto millionaires, or whales, as they are referred to in the crypto sector, are made. This rapid climb in value represents an insanely steep climb of more than 9,000,000%, which dwarfs the returns offered by the S&P 500.
Factoring In Time Span
It’s important to note when comparing the S&P 500 and Bitcoin, however, that the cryptocurrency has had an extremely short lifespan when compared to large cap shares. The extremely volatile nature of Bitcoin means that there is a possibility that the currency could, over the long term, experience a significant drop in value that would make it a far less attractive investment than S&P 500 stocks.
If the value of Bitcoin stabilizes, it could present a similar return on investment to that offered by the S&P 500, leaving them relatively even. At this point in time, however, it’s clear that Bitcoin offers a far superior ROI in the short term.
Total Market Capitalization
Another critical factor to consider when assessing the worth of Bitcoin as compared to the S&P 500 is the total market capitalization- or the total market value- of the cryptocurrency. The total market cap of Bitcoin at the time of this report is around 68 billion dollars, which is significant- but pales in comparison to the total market value of the S&P 500, which is worth around $21 trillion dollars.
Optimistic estimates of the future total market cap of Bitcoin, however, place the cryptocurrency within spitting distance of the total worth of the S&P 500. Internet entrepreneur and cybersecurity legend John McAfee has stated that he’d perform an egregious sex act on national television if one BTC is not worth more than $500,00 USD within three years, which would place the total market value of Bitcoin at around $9 trillion USD.
It’s also worth noting that the total market cap of Bitcoin has grown over 8,000% within the last year, which is a trend that should not be overlooked.
Bitcoin As A Single Stock
When comparing Bitcoin to the S&P 500, it’s important to assess the cryptocurrency as a single stock for the sake of the comparison. Investing in the S&P 500 offers a far greater degree of diversification, at the cost of slower growth. As the fundamental nature of cryptocurrency is wildly different than stock market investment, however, it’s not practically accurate to hold this comparison to the letter. It’s definitely true, however, that large cap stock investment is far more stable and slower-moving than the volatile crypto market.
S&P 500 Stocks Index Vs Cryptocurrency Final Thoughts
When deciding on whether to invest in the S&P 500 or pursue cryptocurrency, it’s important to take into account your own personal goals and circumstances, risk tolerance, and speculative assessment. If you’re open to the idea of investing in a speculative asset that has generated extremely high returns in a short amount of time, then Bitcoin is the right horse for you to bet on.
If you’re looking for a stable, historically reliable investment that generates measurable, consistent, but slower returns, then the S&P 500 is probably a better choice. Bitcoin has risen dramatically over the last several years, but can be easily disrupted by the vicissitudes of the economic zeitgeist.
Whether you choose to invest in the S&P 500 or cryptocurrency, it’s essential to perform your due diligence and weigh the pros and cons of each choice carefully before pulling the trigger.