Bitcoin's more than 40% rise can't hide its decline
This year, Bitcoin (BTC) has performed impressively, rising more than 40%, surpassing major stock indexes, fixed income securities, gold and oil. However, such growth has failed to hide the disadvantages of its high volatility.
Although Bitcoin has performed well in terms of returns, its return-to-volatility ratio is only less than 10%, significantly lower than gold's industry-leading level of nearly 20%. Goldman Sachs' data highlights that this ratio is an important indicator for evaluating the return per unit of risk of an investment. In comparison, gold has not only risen steadily, but also increased by 28% in absolute terms.
Goldman Sachs also pointed out that assets such as Ethereum, Japan's TOPIX Index and the S&P GSCI Energy Index have similarly low return-to-volatility ratios. This supports the view of cryptocurrency skeptics that Bitcoin is too volatile and unsuitable as a safe haven.
This low risk-adjusted return also explains why gold has been able to remain strong during times of market instability, such as during the period of increased tensions in the Middle East, while Bitcoin has fallen sharply.
