If you bought Grayscale Bitcoin Trust (GBTC) when it launched less than nine years ago, you’d have a tough time finding a better investment. No wonder there’s so much excitement that new bitcoin ETFs might start trading early next year.
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Just $10,000 invested in the Grayscale Bitcoin Trust on its tradable debut on May 4, 2015, is worth $580,340 today. That’s an astounding 5,703% gain in that time. Just to put this score into context, it outstrips the gains of all but one S&P 500 stocks in that time. Only AI pioneer Nvidia (NVDA), up 7,625%, has done better.
And bitcoin prices keep flying past stocks. The price of bitcoins trading on Coinbase is now pushing $34,700, up more than 20% this year. That’s solid given the S&P 500 is up just 9% and falling since July 31.
No wonder many ETF investors are trying to figure out how and when to add bitcoin exposure to their portfolios.
“Bitcoin’s censorship resistance and disinflationary qualities make it unique among global asset classes,” says new research from Edward Engel at Singular Research.
Bitcoin: Showing Its Mettle
It’s easy to discount bitcoin as just an object of speculation. But its long-term performance is difficult to ignore anymore.
The Grayscale Bitcoin Trust posted an average 10-year annual return of 49.7%, says Morningstar Direct. That’s higher than any other major ETFs, including leveraged ones that amp up the performance of hot sectors. Even the Direxion Daily Technology Bull 3X ETF (TECL), that triples the gains of technology stocks on a daily basis, returned just 37.6% annually in the past 10 years.
Much of the rise in bitcoin and Grayscale Bitcoin Trust is connected with the strong odds regulators will approve an actual bitcoin ETF connected with spot prices, according to Todd Rosenbluth, head of research at VettaFi. “The pool of investors would grow when these products begin trading,” he said.
A number of ETF providers are vying to be the first to offer a true spot bitcoin ETF. But it’s all in the hands of regulators and asset managers trying to reduce fraud, Rosenbluth says. He thinks it’s only a matter of time. Grayscale is moving to convert its fund into a spot-price bitcoin ETF.
“It is increasingly likely that multiple spot bitcoin ETFs come to market by February 2024 ahead of the Exchange ETF conference,” he said. “We expect the SEC to avoid crowning a king of spot bitcoin ETFs and approve products from multiple providers rather than just one at first.”
And demand for the spot ETF could push demand for bitcoin up the equivalent of $3,000 per bitcoin, says Engel.
Next Stop For Bitcoin? $40,000?
Some investors, though, are bullish on bitcoin no matter what happens with the new ETFs.
Growing uses of bitcoin could push the price to $40,000 in 12 months, Engel says. Specifically, the cryptocurrency this year is showing its power as a counterweight of stock volatility.
Bitcoin prices tend to not move in lockstep with stocks, with a correlation of just 0.3%, Engel says. That’s well below a correlation of 1, which would be an asset that moves exactly like the S&P 500. “We see this correlation breaking down further as several bottom-up catalysts lift (bitcoin) in the next 12 months,” he said.
“Not only has bitcoin outperformed during periods of aggressive government stimulus and monetary easing, but BTC also historically rallies during banking crises,” Engel said. “This includes the U.S. regional banking crisis in March 2023 that sparked a 30% rally for BTC.”
Investors, though, must remember the risks. “Crypto is a higher reward high risk investment so it can boost returns in a broadly diversified portfolio,” Rosenbluth said. “However it remains volatile.”
Top Non-Leveraged Funds In Past 10 Years
| Name | Ticker | Annualized 10-year return |
|---|---|---|
| Grayscale Bitcoin Trust (BTC) | (GBTC) | 64.15% |
| iPath Global Carbon ETN | (GRNTF) | 34.12 |
| VanEck Semiconductor | (SMH) | 23.35 |
| iShares Semiconductor | (SOXX) | 22.74 |
| Invesco Semiconductors | (PSI) | 22.17 |
| SPDR S&P Semiconductor | (XSD) | 20.93 |
| Technology Select Sector SPDR | (XLK) | 19.00 |
| iShares US Technology | (IYW) | 18.89 |
| Vanguard Information Technology | (VGT) | 18.72 |
| Fidelity MSCI Information Tech | (FTEC) | 18.48 |
