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Bitcoin: A Crumby Way to Save for Later
For investors seeking positive future returns, Bitcoin offers little reliable reason to expect them. But could it make sense for investors seeking a store of value?
My three-year-old likes to put Jatz crackers in his pocket to “save them for later.” He is often disappointed later when he pulls out a fistful of crumbs. If you want to save something for later, the thing you store it in needs to be reliable. We learn from experience that pockets may not be a reliable store for crackers, just like Bitcoin may not be a reliable store for wealth.
Over the past decade, Bitcoin’s annualised volatility has been nearly five times higher than that of the Russell 3000 Index—76.9% compared to 15.8%.1 Since its first recorded market price in August 2010, Bitcoin has taken investors on a volatile ride, with 27 peak-to-trough declines exceeding 10%, 10 declines exceeding 30%, and five declines exceeding 70%.
This data suggests Bitcoin is not a reliable way to store value. It is a way to speculate on it. And it could leave investors HODLing a fistful of crumbs.2
Exhibit 1
Bitcoin vs. Russell 3000 Index Peak-to-Trough Declines
2 August 2010–31 December 2024
Past performance is not a guarantee of future results.
Footnotes
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1. US market is represented by the Russell 3000 Index. Based on monthly Bitcoin and Russell 3000 Index returns for the 10-year period ending 31 December 2024. Russell data in USD.
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2. “HODL” refers to “hold on for dear life,” a commonly used phrase within the crypto community.
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