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Should You Invest in Bitcoin, Gold, or Equities: Past Performance and Upside Potential


People mostly invest their money for capital preservation and for an increase in the value of their assets. However, you can potentially preserve and increase your wealth using different kind of investments such as equities, precious metals, Bitcoin, bonds, and real estate among other things.

There’s never a one-size-fits-all investment; nonetheless, an objective analysis of the performance of different investment vehicles will show you that some assets have a tendency to outperform other assets without any input from the investor.

This article provides insight on the past performance of Bitcoin, gold, and equities in order to show you how other investors have fared with the three assets. The article also provides insight into the potential performance of the three assets in order for you to know what you can expect going forward.

Bitcoin VS Gold and Equities: Past Performance


The chart above shows the performance of Bitcoin in relation to equities and gold in the year to date period since the markets opened for trading this year.

For the purpose of analysis, I opted to use the S&P 500 Index and the Dow Jones Industrial average Index to represent equities. The S&P 500 index is based on 500 biggest companies (by market capitalization) listed on the NYSE and NASDAQ. The Dow Jones Industrial Average Index refers to a price-weighted average of 30 market-moving stocks listed on the NYSE and NASDAQ.

In order for the analysis to be balanced, I have chosen the NYSE Bitcoin Index as a representation of Bitcoin price. The NYSE Bitcoin Index represents the U.S. Dollar value of one Bitcoin based on transactional averages on major Bitcoin exchanges. I have also added the price performance of gold in U.S. dollar for good measure.

From the chart above, you’ll observe that NYSE Bitcoin Index (Blue) has scored price gains of 44.13% – the index made price gains of as much as 75% in the middle of the year.  The SPDR Gold shares index (Green) had scored year-to-date gains of 17.94% and gold (purple) has recorded YTD gains of 24.97%. In essence, Bitcoin has outperformed gold by more than 100% this year.

You’ll also observe that the performance of stocks pales significantly in comparison to the performance of Bitcoin and gold in the year to date period. For instance, the S&P 500 (Orange) is up by a measly 5.72% while the Dow Jones industrial average is up by a measly 4.84%.

Bitcoin VS Gold and Equities: Future Performance

It doesn’t make sense to invest in an asset just because it had an impressive past performance. In fact, astute investors will want to see decent proof that an investment has the potential to deliver good ROI in the future. It might interest you to know that Bitcoin has an impressive upside potential ahead and its upside potential makes it a better investment that gold or equities. Below are two factors that support the bullish thesis for Bitcoin.

1. Increased volatility stemming from U.S. elections

One of the factors that indicate that Bitcoin has impressive upside potential ahead is the upcoming U.S. presidential elections. There’s no doubt that the 2016 general election is one of the most polarizing elections in U.S. political history. The Republican flagbearer, Donald Trump and his Democratic opponent, Hillary Clinton are forcing U.S. voters to choose between the lesser of two evils. Trump could be rash and abrasive while Clinton could be cold, detached, and calculating.

However, the instability in the geopolitical landscape has increased the volatility in the equity markets. In the buildup to the elections, the CBOE S&P 500 volatility index has increased by 13.31% and the volatility will increase in the remaining weeks to the elections. Volatility is not good for equities; hence, investors are left with gold or Bitcoin investments for a measure of stability.

2. Uncertainties surrounding Brexit

I have already established that the upcoming U.S. presidential elections has eliminated equities as a viable investment vehicle and that investors are left with gold and Bitcoin. However, the realities of the Brexit vote in which the U.K. voted to leave the EU would start sinking in the next couple of months. UK Prime Minister, Theresa May has signaled are readiness to begin the official process of Britain’s exit from the EU.

However, the process of Britain’s exit from the EU might weaken the Pound Sterling while making the U.S. dollar stronger. A strong dollar makes gold expensive for potential buyers with currencies other than the greenback. Hence, gold might suffer from reduced demand going forward when the realities of the Brexit vote starts to set in. The reduced demand for gold will hurt gold prices; hence, gold is not really a better alternative.

Smart investors will do well to invest in Bitcoin before the volatile nature of the U.S. presidential elections start forcing investors out of stock. More so, smart investors should start taking up positions in Bitcoin now before Britain begins the formal process of breaking away from the EU.

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