Introduction

The objective of this article is to compare Bitcoin returns performance relative to stocks.

This is to clear up misinformation that Bitcoin returns are smaller than stocks.  This comparison is easily verifiable.

The long term implications of this comparison is IMHO, of critical importance.  Don't ignore. 

Introducing IBIT

If you have never heard of IBIT before, this is iShares Bitcoin Trust, is an exchange-traded fund (ETF) in the US stock market that gives investors exposure to Spot Bitcoin. 

It's managed by BlackRock, the world's largest asset manager.

It was first launched in early 2024, with nearly 1 year ago now.

The spot Bitcoin ETF tracks the performance of Bitcoin very well, save for a small AUM fees which goes to Blackrock.

What's amazing about IBIT's first year performance is that right off the bat, it rapidly became Blackrock's most successful ETF on launch and they are looking to do more.   

Comparison against Gold ETF

To illustrate how fast IBIT has grown, BlackRock also manages its popular Gold ETF for nearly 2 decades.  However, in just less than a year, IBIT AUM already far surpassed Gold ETF!   What it took 20 years for Gold to achieve, is surpassed by Bitcoin in less than a year.   See the article here - https://www.investopedia.com/blackrock-s-bitcoin-etf-assets-surpass-those-of-its-almost-20-year-old-gold-etf-8742363

Performance Comparison between Bitcoin vs Stocks

The "gold standard" / benchmark for stocks to compare is SPX - the S&P500 index, the worlds most popular stock index as reference.

Observations

1. Over the 1 year period shown, the S&P500 stock market performance is +25.45%, a very good result, 2.5 times its past long term performance average of say 10% per annum.   
   1. This +25% performance of course simply beats Bursa KLCI index returns hands down.   
   2. The S&P500 is clearly one of the world's best equity markets globally.  Top notch without a doubt.
      
   3. Even Warren Buffett recommend everyone to invest in S&P500 and not to bet against it.
2. However, let's take a look at Bitcoin.
   1. Over the same period, IBIT performance is +113.39%!
   2. This is roughly 4 times S&P500 performance!
      
3. Options and stock academics are NOT surprised by this result - in fact it is quite average which is rare.   
   1. They are not surprised because IBIT and S&P500 (SPX) have Options which are actively traded in the US markets.  
   2. As of last Friday, I took a look at the Option chain and it shows IBIT implied volatility is around 61% (1 month ATM options) and SPX at around 15%.   
   3. Basically, according to the Options market, IBIT is expected to be 4 times more volatile than SPX.
   4. In academic terms, higher risk = higher rewards and it is not unreasonable to expect 4 times higher expected returns to IBIT vs SPX.
   5. The academic expectations also happened to come true from practical observation above (although this is co-incidental, doesn't occur often).  It's about long term expectations.

Comments

1. This 4 times outperformance has HUGE ramifications to expected 2025 full year returns, to TradFi (Traditional Finance), to investors, to the global funds industry, etc.  Make no mistake - it is very disruptive.
   
2. For example, if you believe higher risks equals higher returns (and this is more than borne out when looking at past Bitcoin 15 year returns vs stocks), then, in upcoming 2025, if S&P500 delivers 10%-15% returns, it is not inconceivable, as a "base line" to think that Bitcoin may deliver 40%-60% returns in 2025.   It is unlikely to be 100% correlated because disruptive events can cause dislocations, but if you have a 4-10 year horizon, it is almost certain to be so.
3. And then, when you combine this knowledge with the knowledge that passive investing in S&P500 has beaten the vast majority of active fund managers year in year out, what happens when you combine both IBIT with SPY instead of SPY alone?
4. It is shockingly huge, that today, for the first time in human history, we now have a digital asset that not only outperform the impossible (beat S&P500) but delivers 4 times the performance of S&P500, with 4 times the volatility.
   
5. The impact to the funds management industry in particular to passive funds management industry is HUGE.   So, after a long deliberations, for the first time in the funds management industry, the world's global fund managers have started to recommend to their institutional and high net worth clients, to allocate some of their assets into Bitcoin.  It's a start, because they plan to accelerate this in 2025 and in the future.
   1. In Blackrock's case, their recommendation is to own 2% in IBIT. 
   2. In Fidelity's case, even more aggressive, recommending up to 10% in FBTC (Fidelity's Bitcoin ETF).
6. Theoretical optimisation studies by these giant global fund managers actually showed a much higher optimal allocation to Bitcoin than 10% ... the figure is so high, I won't quote it here.
7. The threat to funds managers are real.  Already, the majority does not outperform the index.  And now, we have a supercharged index.  In time, when the performance results are out, it will be there more and more, for everyone to look and compare.  Right now, they are trying to minimize the comparisons and still encourage active stock investing.   Who will want to invest in stocks anymore, when Bitcoin delivers 4X the performance?  So, there will be a lot of vested interest to protect the status quo.
   

Summary and Conclusion

It is absolutely crazy, how fast the world has changed in just 1 year and we are still in early innings for Bitcoin.

Warren Buffett did not expect this development, as for the first time in human history, there is now potentially a new passive ETF that can outperform the S&P500 index by 4 times.

This is because we are entering a unique period in human history - a "once in a human history event", to see the birth of a new digital asset class, for the global mass to invest in.   

Global adoption of Bitcoin is still in its infancy and this outperformance threatens the traditional funds management industry.  All these are old and known history to Bitcoiners.   What's unique is the possibility for the first time that the incoming US administration has finally decided, after 14 years of trying to shut Bitcoin down, to join them.

As I shared previously, even our neighbour country Thailand is now thinking to introduce a Bitcoin ETF.   I think Bursa should introduce one too.

Hence, IMHO, Bitcoin adoption globally is rising, accelerating and unstoppable in the long term.

It's the new future and until Bursa launches its own Spot Bitcoin ETF, more funds will leave Bursa to countries that offers Bitcoin exposure.   Luno Malaysia is trying to raise visibility to Malaysians to invest via them into Bitcoin and for those who are proactive, this is certainly a valid option. 

No doubt, with high volatility comes big crashes in future, and you can bet, Trad Fi will come back with FUDs (Fear, Uncertainties, Doubts) when this happens but the internal private academic studies are solid.  Bitcoin will outperform stocks in the long term, as it has much higher volatility.

There are other far-reaching implications with disruptive developments like this.

Disclaimer:  As usual, I am just a random guy on the Internet and this is not financial advise.  You are solely responsible for all of your investing and trading decisions.