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Cryptocurrency vs. Traditional Assets: Top 10 Cryptocurrencies Slightly Outperform This Year, S&P 500 Offers More Stable Long-Term Returns

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Cryptocurrency vs. Traditional Assets: Top 10 Cryptocurrencies Slightly Outperform This Year, S&P 500 Offers More Stable Long-Term Returns

This year, the financial market experienced a collapse due to the impact of the COVID-19 pandemic, turning the stock market into a dream casino for retail investors. The massive money printing by the Federal Reserve to rescue the market has led to an infinite expansion of the U.S. stock market. A Reddit user conducted an interesting experiment by investing funds in both the stock market and the cryptocurrency market. In the middle of 2019, cryptocurrency outperformed the stock market, but the long-term return on investment in U.S. stocks still surpasses that of cryptocurrency.

Top 10 Cryptocurrencies

Reddit user Joe-M-4 shared an interesting experiment on the forum. Between 2018 and September 2020, he invested $1,000 separately over three years in the S&P 500 index and the top ten cryptocurrencies by market capitalization. From January 2019 to September this year, the cryptocurrency investment return rate was 53.8%, outperforming the stock market.

Investment Returns of Top 10 Cryptocurrencies (Source: reddit)

Based on the return rate, the initial $100 invested in each of the top ten cryptocurrencies (totaling $1,000) has grown to $1,538. In comparison, the S&P 500's performance during the same period was about 35%, slightly lower than the top ten cryptocurrencies. The monthly investment returns are as follows:

Monthly Investment Returns of Top 10 Cryptocurrencies (Source: reddit)

High Volatility in Cryptocurrencies

The user also listed the annual performance of the top ten cryptocurrencies as follows:

It is worth noting Ethereum, which hit a historical high of $1,448 in January 2018, remained stagnant until this year when it briefly returned to its June 2018 level. However, according to the user's investment data, Ethereum's return rate over these three years was 104%, surpassing the top ten cryptocurrencies.

Investment Returns Over Three Years (Source: reddit)

This data also highlights the famous high volatility of the cryptocurrency market. Investing $1,000 in Ethereum at the beginning of 2018 would have reduced its value to $482 by the end of the year, with Bitcoin Cash (BCH) dropping to only $92.

Comparison with the S&P 500 Index

Despite the recent drop from its previous highs, the S&P 500 has also risen by 35% since January 2019. Annual returns are as follows:

  • Investing $1,000 in the S&P 500 on 1/1/2018 = approximately $1,260 today
  • Investing $1,000 in the S&P 500 on 1/1/2019 = approximately $1,350 today
  • Investing $1,000 in the S&P 500 on 1/1/2020 = approximately $1,050 today

Overall, while the top ten cryptocurrencies have outperformed the S&P 500 index in the past two years, the S&P 500 has been a more stable investment over the three years, with a return rate of 22% from 2018 to date, compared to only 11% for the top ten cryptocurrencies. Investing in ten different cryptocurrencies may seem to diversify risk, but it may actually make it easier to invest in underperforming assets. More than half of the top ten coins have been replaced by projects like BNB, DOT, and LINK since 2019, including Tron, Stellar, and EOS.