Bitcoin and Ethereum Have Outperformed the S&P 500 Since 2020

this trend, a factor often overlooked in such analyses. From a portfolio perspective, Copper.co applies Modern Portfolio Theory, finding that Bitcoin’s 70% annualized volatility, a 4% risk-free rate, and a 0.25 correlation with the S&P 500 suggest an optimal allocation of 18% Bitcoin to maximize the Sharpe Ratio.

“As of today, the risk-to-return symmetry is striking. With the S&P 500 delivering a 20% CAGR over the past five years, this implies a 4:1 risk-reward ratio compared to crypto assets,” Aboualfa stated, emphasizing the potential for balanced investment strategies.

The report, intended for institutional and professional clients, includes a disclaimer that digital assets carry high risks and may not be suitable for all investors, reflecting Copper.co’s adherence to Swiss financial regulations.

As highlighted in the report, the analysis of the cryptocurrency market shows a notable correlation between Bitcoin, Ethereum, and the S&P 500. The impressive 83% compound annual growth rate achieved by both Bitcoin and Ethereum since their 2020 lows surpasses the S&P 500’s 20% CAGR during the same period. Furthermore, the findings indicate that despite recent price declines, both digital assets have displayed consistent long-term growth patterns.

In the context of the broader market landscape, the report discusses the S&P 500’s correction, which aligns with previous market behaviors observed in 2020. This observation hints at a potential turning point and offers hope to investors seeking a market rebound. The report also delves into Bitcoin’s relationship with the M2 Global Liquidity Index, highlighting historical correlations and potential price movements based on lag periods.

The analysis suggests that Bitcoin may experience sideways trading until late March or April, in line with previous price cycles. By exploring various factors such as market cap analysis and price simulations, the report speculates a potential price peak of $160,000 by May or June. However, the sustainability of this trend is contingent upon the continued rise of M2, an aspect often overlooked in market analyses.

From a risk management perspective, Copper.co’s application of Modern Portfolio Theory underscores the importance of balanced investment strategies. By considering Bitcoin’s volatility, risk-free rate, and correlation with traditional equities, the report recommends an optimal allocation to maximize returns while minimizing risks. The emphasis on risk-reward symmetry reinforces the appeal of diversified portfolios that include both traditional assets and cryptocurrencies.

Overall, the report provides valuable insights for institutional and professional investors, offering a nuanced perspective on the current market dynamics and potential investment opportunities. By highlighting the interplay between Bitcoin, Ethereum, and the S&P 500, Copper.co sheds light on the interconnected nature of financial markets and the importance of sound risk management strategies in navigating volatile market conditions.