Bitcoin’s Risk-Adjusted Returns Superior To S&P 500 And Gold

Bitcoin has been outperforming gold and the S&P 500 over the last year, according to a recent market analysis. 

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Bitcoin, the world’s most prominent digital currency, has produced more robust risk-adjusted returns over the last year than rival gold or the benchmark S&P 500 index, according to data provided by market research firm TradeBlock.

To arrive at this conclusion, TradeBlock leveraged the Sortino Ratio, which is similar to the Sharpe Ratio but penalizes only downside volatility when calculating risk-adjusted returns.

The Sortino Ratio measures an asset’s gains, relative to the upside volatility that it experiences.

TradeBlock looked at risk-adjusted returns since some assets generate very compelling returns, but also suffer significant price fluctuations.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.] 

Research Methodology

For this particular analysis, the market research firm specifically looked at the period between August 13, 2018, and August 9, 2019, sourcing data on bitcoin, S&P 500 and gold from TradeBlock.com, Yahoo! Finance and GoldPrice.org, respectively. 

By examining this information, TradeBlock determined that bitcoin had a Sortino Ratio of 1.97 during the period, while gold stood at 1.06 and the S&P 500 at 0.25.

Interestingly enough, this analysis also looked at digital currency ether, which had a ratio of 0.45.

Several analysts weighed in on TradeBlock’s methodology, specifically its decision to leverage the Sortino Ratio in its calculations.

Sortino Ratio

“Given Bitcoin’s parabolic rises in the past, it’s easy to see why one might prefer to use the Sortino ratio, as the Sharpe ratio inherently biases against extremely positive returns,” said Yazan Barghuthi, founder and CEO of blockchain firm Jibrel.

Evan Kuo, CEO and cofounder of digital currency…

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