How much Bitcoin generated wealth for those who invested in it in 2009 compared with other investments
How much did an initial investment of $100 bring to Bitcoin investors when compared to other investments?
The first investment rule is diversification. Do not put all the assets in one basket. But ‘knowing’ what will be the best investment to make this basket is difficult even for the wizard of Omaha, as Warren Buffet is known. Whoever invests, is depositing in the present, the expectation of a supposed profit in the future and the future by nature is uncertain.
However, looking back and understanding past behaviour, it is possible to have insight into the future. Using statistical methods and a panorama of the past, it is possible to predict what the next point outside the curve of a given investment will be.
Using this strategy, what were the highest financial returns of a group of investments in the ten-year period and what is their direct correlation with Bitcoin?
In 2010, the price of Bitcoin shot up 900% in five days. The value of a Bitcoin went from a mere US$ 0.008 to US$ 0.08. So who bought US$ 100 Bitcoins for US$ 0.008, in one week made a profit of 900%.
But in this same period, nobody would look at Bitcoin as an investment to be taken seriously and so, the assumption that investing in this asset would be a big deal, was not on the radar of many investors. The same $100 would probably be invested in more ‘promising’ assets, such as Amazon, Tesla and other large companies.
Interestingly, those who invested in Ford lost 50% of their investment in the last ten years. A sign of the times, when the economy shifted from industrial groups to software based, information-focused companies, which have been responsible for the great wealth generation of the last ten years.
What about the stock market?
As for the stock market, there was a 45.3% increase in the Dow Jones Industrial Average over the period 2010-2020. The S&P 500 rose almost 48.4% over the ten years, and the high-tech Nasdaq 100 almost doubled to 99.1%. Comparing all these assets over the years with Bitcoin, the following valuation scenario is drawn:
Total return on an initial investment of $100 over 10 years
1. Bitcoin: 9.150.088%.
2. Amazon: 3.156%.
3. Apple: 2.345%.
4. Visa: 1.597%.
5. Microsoft: 899%.
6. JP Morgan: 433%.
7. Facebook: 420%.
8. Berkshire Hathaway: 228%.
9. Johnson & Johnson: 216%.
10. Walmart: 171%.
11. Alibaba: 108%.
Even with the 50% drop in the price of Bitcoin in March 2020, Bitcoin gave a surprising 9,150,088% return to those who have invested in the asset for ten years. Companies like Amazon (+3,156%) and Apple (+2,345%) still impress, but no investment compares to Bitcoin in return. However, even the stock market represents significant valuation figures that rival Bitcoin, there is a recent correlation between these assets.
In the last stock market crashes, Bitcoin was pari passu with these. Despite the constant discourse that Bitcoin would be an ideal value reserve for periods of crisis, this premise has not been strong enough in the face of its constant relationship with the financial market and particularly with gold.
Many economists have expressed concerns that we are dealing with a bubble in the stock market in the face of one of the biggest recessions of the last 100 years. Even so, we are experiencing an astonishing valuation of the capital markets and Bitcoin, which has accumulated a valuation to date of 77%.