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The Bitcoin rally was so huge it was worth the risk-adjusted twists

(Bloomberg) – Yes, you created a bundle containing Bitcoin from above a month ago. And even with a sale like this, it was probably worth it: with the cryptocurrency falling as much as 31% on Wednesday, it is questionable whether the token has been a good investment over time. As frightening as the sudden erasure is, the gains have been so huge that – even risk-adjusted – Bitcoin has done much better than other major assets. . Over the period, it generated a return of 255%, a rally that few other investments can match. At the same time, its price swings were also almost unprecedented – 11 separate sessions of intraday losses of at least 10%. Adjusted for daily volatility, Bitcoin’s return since September has been more than double that of the S&P 500 index and easily broke a negative reading for Treasuries. “Despite the volatility, BTC’s returns more than made up for it,” said Stéphane Ouellette, managing director and co-founder of FRNT Financial. “We’re talking about the biggest bull market for the asset.” Of course, exercise is a soft defense if you are looking at losses over 40% from the top. Bulls tout its use for diversification against inflation while skeptics question everything from its energy use to regulatory risk. If anything, the performance data is a lens in the psychology of the HODL crowd that has built up in the asset despite frequent busts like Wednesday’s Bitcoin cut losses to 15% at 12:12 p.m. in New York after Tesla CEO Elon Musk tweeted that the company has ‘diamond hands’, using emoticons to spell the sentence.Read More: Bitcoin Plunge Wipes $ 500 billion worth in Crypto Rout. The measure, which is not annualized, is designed to show performance per unit of risk. Seen from a broader perspective since 2010, Bitcoin’s risk-adjusted return has shown similar outperformance against other assets. The same goes for a variety of time periods – the start of 2020 or 2015 – which capture its most recent rally. Periods where this doesn’t hold true include using a starting point in 2017, when the coin fell 80% from one high to the next. Yet Chris Grisanti, chief equity strategist at MAI Capital Management, said it was difficult to determine if Bitcoin is “When you compare it to commodities, when you compare it to stocks, you have over a century of data for others and for Bitcoin you don’t ‘don’t have one,’ said Grisanti. “There haven’t been enough different investment environments for Bitcoin as there have been for other asset classes.” Interest in digital assets has picked up in recent months as more traditional businesses that have long hesitated in the crypto space have warmed to cryptocurrencies. But many others are reluctant to adopt the asset due to its increased volatility. “Look, what people don’t understand is the novelty of digital assets,” Julian Emanuel, chief equities and derivatives strategist at BTIG, told Bloomberg TV. “You just have to understand that with the evolution of this technology – and it’s really as much a question of technology as anything – you’re just going to have immense volatility. More stories like this are available on bloomberg. Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP


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