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If You Invested $1,000 in Bitcoin 5 Years Ago, Here’s How Much You Would Have Today
Index investing is a great approach, but you can do even better with specific stocks or cryptocurrencies from time to time.
Let’s say you invested $1,000 in a index fund follow the S&P500 (SNPINDEX: ^GSPC) index 5 years ago. THE SPDR S&P 500 ETF (NYSEMKT: SPY) is a popular option with minimal management fees and a remarkable track record of tracking your chosen index.
If you reinvested the dividends in more shares of the exchange-traded fund (ETF) over time, you would have already doubled your money. This represents an average annual return of 15%, well above the 10-year average of 12% or annual returns of 10% since the ETF launched 41 years ago.
It’s easy to see why The Motley Fool recommends maintaining a diversified stock portfolio for a long period of time, in the spirit of index fund pioneer John Bogle and leading investor Warren Buffett. I mean, good luck finding a savings account with a stable 10% interest rate, let alone the higher earnings in recent years. Diversified investing is a proven strategy for building and protecting your wealth over the long term.
But what would happen if you got $1,000 back from Bitcoin (CRYPTO: BTC) five years ago? The largest cryptocurrency was then in the midst of another crypto winter, hobbled by hacking scandals and regulatory crackdowns with no support from big banks and other financial institutions. The record price of $19,345 from the 2017 Bitcoin boom seemed like a distant memory, fading to $3,644 per token.
Bitcoin’s Rocky Gains Over Five Years
This has proven to be a strong buying window for investors looking to commit their funds over a five-year period. A $1,000 Bitcoin investment on January 15, 2019 was worth $11,540 at the time of writing, exactly five years later:
Bitcoin Price Chart
It hasn’t been smooth sailing, but there’s no denying the general recovery over five years. During this period, Bitcoin investors have faced more cryptocurrency exchange hacks, the coronavirus health crisis, a surge in global inflation and other challenges. Bitcoin prices fell more than 10% in August 2023, not to mention six drops of that magnitude in a single month in 2022. The previous chart includes all of these headwinds and crashes.
The road ahead: bumpy but hopeful
Nonetheless, Bitcoin is back on its digital feet with more gains than losses over the past few months and a strong list of upcoming catalysts for further gains.
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The next Bitcoin halving – a steady increase in the computing power required to mine new Bitcoins – is expected in April 2024. These events are usually followed by a sharp rise in Bitcoin prices over the next two years.
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US regulators recently approved 11 ETF applications based on Bitcoin prices in the spot market. The approval did not result in a big price increase, but easy access to Bitcoin-based investment vehicles such as ARK 21Shares Bitcoin ETF (NYSEMKT:ARKB) and iShares Bitcoin Trust (NASDAQ: IBIT) is expected to ultimately increase trading volume and support higher Bitcoin prices.
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The regulatory environment is starting to become clearer, thanks to renewed public interest in the crypto space and progress in important legal cases such as United States Securities and Exchange Commission v. Ripple (CRYPTO:XRP). The wheels of justice and regulatory rulemaking turn slowly, and I do not expect a full resolution in 2024 or 2025. Yet every step toward clarity is good news, even if it does not always lead to lower costs. taxes and greater investor access to cryptocurrency assets.
The story continues
The overall long-term trend tends to leave traditional stock indexes like the S&P 500 far behind. Additionally, this upward market trend is expected to continue over the next couple of years due to the technology, market, and regulatory events listed below. above – with the caveat that there could be dramatic price drops along the way for a myriad of unforeseen reasons.
Bitcoin is therefore not a magic ticket to automatic investment gains, with significant risk of sudden declines and long periods of stuck or negative returns. Sticking with a market tracker like the SPDR S&P 500 ETF may be a better choice if you’re not ready to deal with the volatility and technical quirks of Bitcoin investing.
It is nevertheless a robust digital currency with an unpredictable but promising future, and I think a modest position in Bitcoin (or one of the Bitcoin-based ETFs) would be a healthy addition to a diversified portfolio.
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Anders Bylund has positions in Bitcoin and XRP. The Motley Fool holds positions and recommends Bitcoin and XRP. The Mad Motley has a disclosure policy.
If You Invested $1,000 in Bitcoin 5 Years Ago, Here’s How Much You Would Have Today was originally published by The Motley Fool