Comparing bitcoin and stocks investment at similar level of risk.

This blog post deals with the following question: “how much could one earn over the past 5 years, if one invested in bitcoin, but attempted to have no more risk than while investing in stocks or equities of the developed countries (US, Europe, Japan)”


We’ve been keen investors and advocates of cryptocurrencies since June 2011,  they have treated us well. However, many prospective owners or investors are wary of them and their #1 or #2 comment usually was: cryptocurrencies are just too risky or too volatile. They are right – but only partly. Cryptocurrencies are only risky, if you devote all or a substantial part of your portfolio to them. But, if you simply lower the exposure to just 10% or 15% of your portfolio, such an approach will suddenly start to make sense.

The following chart represents performance of an investment into bitcoin (adjusted to the level of equity volatility), compared to 100% investment in US, European and Japanese stocks. The level of adjustment has been calculated in such a way, that at any time investor could expect a similar level of risk (measured by volatility) as the US stocks (note to geeks: it is a volatility targetting strategy).


Over the past 5 years profits realized in bitcoin have been 5-9 times higher than for equities, while interim losses have been similar. Please note, that bitcoin has experienced an 87% bear market in 2014-15, which is as bad as one could expect. The adjusted exposure strategy lost 21%. A typical bear market in US, European and Japanese stocks can result in as much as 40-50% losses.

Profits and risk of a low exposure bitcoin investment, compared to global stocks (Aug ’12 – Jul ’17)

Cumulative profits Deepest recorded loss



US stocks



European stocks



Japanese stocks 64%