Tristan on Nostr: Bitcoin is the New S&P 500: The S&P 500 has been the standard for “the market” ...
Bitcoin is the New S&P 500:
The S&P 500 has been the standard for “the market” for decades. Where the S&P goes, the market as a whole largely follows. For this reason, the S&P 500 which indexes the 500 largest stocks in the country is seen as the benchmark for performance when looking at investments.
If you are an individual picking stocks, you aim to beat the market—the S&P 500. It is that simple.
If you are a hedge fund managing investor funds, your basis for performance is if you can beat the market—once again, the S&P 500. It is that simple.
With 2024 coming to a close, Bloomberg’s Nishant Kumar compiled a list of hedge funds and how they performed in the year.
While this list is not exhaustive, it paints a decent picture of the overall performance of the various hedge funds around the world. It also displays the true difficulty of beating the market. The S&P 500 returned 23.3% over the last year. By this metric, only 4 hedge funds in the above image beat “the market.” Warren Buffet, widely considered the greatest investor of all time, and Berkshire Hathaway outperformed the market by returning 25.5% or 2.2% better than the S&P 500. If hedge fund managers, seen as extreme professionals, struggle to beat the market, one can logically assume that the individual who has a career not based on stock trading will struggle to beat the market. By this logic, the safest thing for any individual to do would be to not worry about hedging their investments and instead, purchase shares in S&P 500 ETFs that track the performance of the market.
But the reality is that the returns of the market cannot be taken at face value. The alternative to investing (in anything) is holding cash that is being devalued at the hands of inflation. Holding $5 cash today would provide me with less purchasing power in a year. That is an undeniable fact because of the inflationary characteristics of fiat currencies. So people choose to invest in places with the hope of maintaining purchasing power for the future. The S&P 500, or the “market,” is one such place.
Interestingly, gold, a precious metal and not a company with any earnings, outperformed the S&P 500 over the last year. People have used gold as an inflation hedge, a savior from currency debasement, and as security during economic chaos for thousands of years. If gold, a hard asset for thousands of years, is outperforming the collection of the 500 largest companies in the United States it makes you wonder about the true validity of what a 23.3% return from the market really means. Can you take that percent at face value or is there a certain percentage of that return that is directly attributable to currency debasement?
While we will never get the exact answer, I believe more of the market’s return can be attributed to currency debasement than we would like to admit. I believe that people are flooding the equity markets with their capital in an effort to trade in their devaluing currency for something they believe will beat inflation. This conversation has not even dove into the fact that the Magnificent 7 companies contributed close to 14% of the total 23.3% for the S&P 500.
With this thinking, if the name of the game is to beat currency devaluation and maintain your purchasing power into the future, there is no better place to park your capital than Bitcoin. In an ever-increasingly digital world, Bitcoin takes the shortcomings of gold and capitalizes on all of them.
-Bitcoin has a strict, capped scarcity, gold does not.
-Bitcoin is easily transferable (cheaply and quickly) and extremely divisible. Gold is neither.
-Don’t believe me? Try transporting even one kilogram of gold across the Atlantic.
Better yet, Bitcoin produced about a 120% return in 2024. It absolutely blew the market out of the water. This isn’t an anomaly either, Bitcoin has routinely been one of if not the, best-performing asset of the year for many of the last 15 years. Over the last decade, Bitcoin has grown at an 80% compound annual growth rate. Over the last 5 years, it has returned a compounded rate of 67% annually. These are returns a hedge fund manager would kill to have.
I have previously discussed how Bitcoin is older than the stock market. I now believe it should be the basic metric for what “beating the market” is viewed as. For this reason, Bitcoin is the new S&P 500. You either beat Bitcoin, or you lose.
In the future, the best-performing portfolios won’t necessarily be run by stock traders, hedge fund managers, or traditional finance executives, rather they will be held by the normal person who buys and holds Bitcoin. An action so simple, anyone can do it. An action so simple, people will refuse to do it because of it being boring. An action so boring, people would rather chase the new flashy item and lose than be bored and win. Yet, if you accept the simplicity and boredom, you can have a portfolio that could outperform every hedge fund on Wall Street!
Beating the market is very difficult. Scroll up to the image above and see how many hedge funds in the chart beat the S&P 500. I will remind you again that Warren Buffet only beat the market by a little more than 2%. But after shifting the “market” to be Bitcoin, all of the hedge funds and Warren Buffet got crushed.
Stop overthinking it and realize that Bitcoin is the new “market” and that this market is much harder to beat than the S&P 500.
If you can’t beat Bitcoin (the market), then you should just buy Bitcoin.
Stack SATs.
The S&P 500 has been the standard for “the market” for decades. Where the S&P goes, the market as a whole largely follows. For this reason, the S&P 500 which indexes the 500 largest stocks in the country is seen as the benchmark for performance when looking at investments.
If you are an individual picking stocks, you aim to beat the market—the S&P 500. It is that simple.
If you are a hedge fund managing investor funds, your basis for performance is if you can beat the market—once again, the S&P 500. It is that simple.
With 2024 coming to a close, Bloomberg’s Nishant Kumar compiled a list of hedge funds and how they performed in the year.
While this list is not exhaustive, it paints a decent picture of the overall performance of the various hedge funds around the world. It also displays the true difficulty of beating the market. The S&P 500 returned 23.3% over the last year. By this metric, only 4 hedge funds in the above image beat “the market.” Warren Buffet, widely considered the greatest investor of all time, and Berkshire Hathaway outperformed the market by returning 25.5% or 2.2% better than the S&P 500. If hedge fund managers, seen as extreme professionals, struggle to beat the market, one can logically assume that the individual who has a career not based on stock trading will struggle to beat the market. By this logic, the safest thing for any individual to do would be to not worry about hedging their investments and instead, purchase shares in S&P 500 ETFs that track the performance of the market.
But the reality is that the returns of the market cannot be taken at face value. The alternative to investing (in anything) is holding cash that is being devalued at the hands of inflation. Holding $5 cash today would provide me with less purchasing power in a year. That is an undeniable fact because of the inflationary characteristics of fiat currencies. So people choose to invest in places with the hope of maintaining purchasing power for the future. The S&P 500, or the “market,” is one such place.
Interestingly, gold, a precious metal and not a company with any earnings, outperformed the S&P 500 over the last year. People have used gold as an inflation hedge, a savior from currency debasement, and as security during economic chaos for thousands of years. If gold, a hard asset for thousands of years, is outperforming the collection of the 500 largest companies in the United States it makes you wonder about the true validity of what a 23.3% return from the market really means. Can you take that percent at face value or is there a certain percentage of that return that is directly attributable to currency debasement?
While we will never get the exact answer, I believe more of the market’s return can be attributed to currency debasement than we would like to admit. I believe that people are flooding the equity markets with their capital in an effort to trade in their devaluing currency for something they believe will beat inflation. This conversation has not even dove into the fact that the Magnificent 7 companies contributed close to 14% of the total 23.3% for the S&P 500.
With this thinking, if the name of the game is to beat currency devaluation and maintain your purchasing power into the future, there is no better place to park your capital than Bitcoin. In an ever-increasingly digital world, Bitcoin takes the shortcomings of gold and capitalizes on all of them.
-Bitcoin has a strict, capped scarcity, gold does not.
-Bitcoin is easily transferable (cheaply and quickly) and extremely divisible. Gold is neither.
-Don’t believe me? Try transporting even one kilogram of gold across the Atlantic.
Better yet, Bitcoin produced about a 120% return in 2024. It absolutely blew the market out of the water. This isn’t an anomaly either, Bitcoin has routinely been one of if not the, best-performing asset of the year for many of the last 15 years. Over the last decade, Bitcoin has grown at an 80% compound annual growth rate. Over the last 5 years, it has returned a compounded rate of 67% annually. These are returns a hedge fund manager would kill to have.
I have previously discussed how Bitcoin is older than the stock market. I now believe it should be the basic metric for what “beating the market” is viewed as. For this reason, Bitcoin is the new S&P 500. You either beat Bitcoin, or you lose.
In the future, the best-performing portfolios won’t necessarily be run by stock traders, hedge fund managers, or traditional finance executives, rather they will be held by the normal person who buys and holds Bitcoin. An action so simple, anyone can do it. An action so simple, people will refuse to do it because of it being boring. An action so boring, people would rather chase the new flashy item and lose than be bored and win. Yet, if you accept the simplicity and boredom, you can have a portfolio that could outperform every hedge fund on Wall Street!
Beating the market is very difficult. Scroll up to the image above and see how many hedge funds in the chart beat the S&P 500. I will remind you again that Warren Buffet only beat the market by a little more than 2%. But after shifting the “market” to be Bitcoin, all of the hedge funds and Warren Buffet got crushed.
Stop overthinking it and realize that Bitcoin is the new “market” and that this market is much harder to beat than the S&P 500.
If you can’t beat Bitcoin (the market), then you should just buy Bitcoin.
Stack SATs.