Bitcoin Outshines Other Assets Despite Volatility, NYDIG Reports

Despite its well-known volatility, Bitcoin continues to be the best-performing asset in terms of returns, according to a recent analysis by the New York Digital Investment Group (NYDIG). The outstanding risk-adjusted performance of Bitcoin was noted in a research released on October 11 by Greg Cipolaro, Global Head of Research at NYDIG. The Sharpe ratio is a typical metric used in finance to assess how well an investment compensates for its risk.

Strong Sharpe Ratios Across Timeframes

Cipolaro’s analysis compared Bitcoin’s returns with various asset classes, such as equities and bonds, and consistently found that Bitcoin ranked favorably across all timeframes. The Sharpe ratio evaluates excess returns relative to the asset’s volatility, and Cipolaro concluded that “Bitcoin ranks favorably compared to nearly every asset class on every metric over every time frame.” Although gold edged out Bitcoin slightly in the last 12 months, Cipolaro said the difference was minimal, likening it to “splitting hairs.”

This assessment counters a recent Goldman Sachs report from October 7, which claimed that despite Bitcoin’s 40% rise in 2024, the gains did not sufficiently offset its volatility. Cipolaro firmly disagreed, emphasizing, “This analysis shows the contrary, that the risks (price volatility) that Bitcoin investors endure are more than made up for in terms of returns.”

Cipolaro stated that while evaluating risk-adjusted returns using Sharpe ratios can be helpful, achieving financial responsibilities ultimately depends more on absolute returns. He also made the point that not all risks that investors may encounter are taken into consideration by the Sharpe ratio, such as censorship or possible asset confiscation.

Even after taking into consideration its erratic price fluctuations, Bitcoin’s track record remains exceptional, solidifying its status as a high-return asset despite these added risks.