Bitcoin in October 2024 gave the best risk-adjusted returns of all the 21 major technology assets I analysed, with a Sharpe ratio of 4.35 – better than NVIDIA, Google and Amazon. All the other major tech companies analysed had negative risk-adjusted returns. All except for Bitcoin, NVIDIA and Google. Bitcoin was more profitable given its volatility. It is becoming an increasingly mature asset class. Some may have been surprised by this result as Bitcoin has had a reputation for high volatility historically.
The power of Sharpe, which compares returns with volatility, captured the fact that assets with high volatility could beat returns-wise even if their risk-adjusted ratios were positive – if those assets paid back the risks through sufficiently large returns on the investment. Bitcoin’s volatility peaked at 11 per cent, which was high, except when compared with the major tech stock ratios for Tesla and AMD (both of which were high but lacked the vertical upswing in ratios that Bitcoin boasted). That current, seemingly favourable Bitcoin ratio held over the highs that month, and even as Bitcoin approaches new risk-adjusted records, Cojocaru cautions that its favourable ratio does not ‘ensure a stronghold tomorrow’ – a clear reference to all the moving markets in which bad news and good news respond to political, social and health market-shifters.
The picture of the same market in October 2024 shows that Bitcoin has risen to the top in the tech and investment scene – and then it is only NVIDIA that is close to Bitcoin in terms of attractiveness for tech investors, with Google also on rebound. It just shows how investment priorities are changing in the wake of Bitcoin entering the tech and investment scene in earnest as a highly competitive alternative not only to tech stocks but also to currencies, possibly even overtaking fiat as the medium of exchange of choice in the future. Bitcoin is here to stay and to grow.
Source: Forbes
