Yes, you would have made more money with the S&P 500 than Bitcoin in 2019

In this post we are going to analyze how in 2019:

1. You had 63.1% more chances of making more money by investing in the S&P instead of Bitcoin in any random day
2. Your Bitcoin could have lost more than 50% of its value 24 times (that’s 1 out of 10 times!)
3. You had a 60% chance of losing money by investing in Bitcoin

If you have been following me at all recently, then you know I am a big supporter of cryptocurrencies (especially the ones that are programmable) but I am an even bigger fan of data-driven decisions.

The last couple of weeks I kept reading online how investing in Bitcoin yielded better returns in 2019 than investing in the S&P 500 and I immediately knew that something was fishy, as the stock market had a great year.

Let’s explore what would have happened if you had placed a trade on a random day and had held on to it until the end of the year. We will be using the SPY ETF to track the S&P 500 and BTC to track Bitcoin.

Let me start with a “shock graph”.

If you had invested in Bitcoin at any random time, your investment would have lost more than 50% of its value 24 times (that’s 10% of the time) in 2019.

Red tiles indicate the days on which if you had invested in Bitcoin, your investment would have been down more than 50% (i.e. a $10K investment had lost at least $5K in value) by the end of the year.

This is due to the fact that Bitcoin was losing money for more than half of 2019.

Not only investing in S&P 500 was a safer choice in 2019, but there was a 60% chance of losing money if you had invested in Bitcoin.

In the histogram, we can see that the majority of the Bitcoin trades you could have made would have resulted in you losing money by the end of 2019. The worst-case scenario is an 82% loss of value for Bitcoin.

For comparison, the chances of losing money with this buy and hold strategy were not only very slim but the maximum risk was losing only 0.33% of your portfolio. Buying the S&P 500 at a random time during 2019 had more than a 60% chance of making you more money than Bitcoin.

Another interesting trivia is the performance difference between these assets (assuming that you bought both of them on the same dates). We can see that the opportunity cost of buying Bitcoin instead of SPY is huge.

So why did people think that Bitcoin was the best investment for 2019

If you put $10k in the S&P 500, the maximum you could have made, if you were really lucky, is $13,429. That’s roughly $3500 extra.

With the same luck, the same $10k in Bitcoin would have made you $19,840 which is almost another extra $10k. Whoa!

The magic word here is “luck”.

If you were of the lucky ones that bought and sold at the perfect time then yes, you would have doubled your money. Otherwise, you had a 60% chance of actually losing money.

On the other hand, 63.1% of the time in 2019 buying and holding the S&P 500 would have made you more money than Bitcoin, at the risk of losing only 0.33% of your investment.

With Bitcoin, you would have lost 82% or $8,200 on an investment of $10,000.

So, there you have it. With Bitcoin in 2019:

1. You had a very small chance of doubling your money
2. You had a 60% chance of losing money
3. You had a 10% chance of losing more than 50% of its value
4. You had a very small chance of losing 82% of its value
5. You had a 63.1% chance of under-performing the S&P 500

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