Bitcoin's annual performance can feel like a rollercoaster ride, with dizzying highs and stomach-churning lows. For many investors, this volatility makes Bitcoin seem like a risky asset. However, a closer look at Bitcoin annual returns reveals an asset with impressive long-term performance that can help investors build wealth over time. This article will help you understand Bitcoin's annual returns over the past decade so you can make confident investment decisions about its long-term potential.
To aid your research, Bitcoin Magazine Pro offers a detailed Bitcoin analysis performance, including annual returns, to help you understand the dynamics of this innovative asset.
Is Bitcoin the Best Performing Asset Class in the Last Decade?
Bitcoin delivered extravagant returns over the last decade, outpacing other traditional assets by a considerable margin. Compiled by the CEO of Compound Capital Advisors, Charlie Bilello examined the returns of the 17 best-performing asset classes since 2011 and came to an incredible discovery: Bitcoin, by a large margin, is the best-performing asset class over the last 10 years.
Gains Since 2011: +20,000,000%
The cumulative gains for Bitcoin since 2011 are more than 20,000,000%, significantly more than the Nasdaq 100 and US Large Caps, which had returns of 541% and 282%, respectively.
On an annualized scale, Bitcoin returned 230% - 10x higher than the Nasdaq 100, the second-best performing asset class. During the same period, large U.S. Caps recorded an annualized return of 14%, high-yield bonds gained 5.4%, and gold returned 1.5%.
Bitcoin Returns vs. Other Assets
If you’re curious how Bitcoin returns compare to those of other asset classes, here’s how its annual and total returns compare to gold, real estate, and the S&P 500. (Spoiler alert: Bitcoin outperformed all three assets by an enormous margin.) Below, we show annual Bitcoin returns, highlighting the outsized volatility compared to assets like stocks, bonds, and commodities:
|
Asset Returns |
2023 |
2022 |
2021 |
|
Bitcoin |
+156% |
-65% |
+58% |
|
S&P 500 |
+25% |
-20% |
+29% |
|
High Yield Corporate Bonds |
+12% |
-11% |
+5% |
|
Gold |
+12% |
+1% |
-6% |
|
Emerging Markets |
+9% |
-18% |
+0% |
|
Bonds |
+5% |
-12% |
-1% |
|
Commodities |
-2% |
+20% |
+30% |
As a risk asset, Bitcoin jumped in value, given hopes that the Federal Reserve would cut interest rates in 2024. Positive sentiment also increased leading up to the halving event in 2024, which happens every four years.
Halving is the process of halving the reward for mining a Bitcoin; miners are awarded 50% lower rewards for verifying transactions. In turn, this reduces the rate of money supply growth, which may cause prices to rise if demand remains elevated. By comparison, the S&P 500 posted 25% returns in 2023, rising above its historical average of 11.5,% while U.S. bonds saw 5% returns.
Bitcoin's Annual Returns Over Different Time Periods
Bitcoin has a clear win compared to traditional investments over the last 10 years. However, what are the annual returns on Bitcoin when looking at it from a 10-year, 5-year, and 1-year period?
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A Closer Look at Bitcoin Annual Returns for the Past Decade
Bitcoin has had an extraordinary decade, returning nearly 21,000% in annualized returns over the past ten years. As with any investment, the annual returns of Bitcoin can fluctuate drastically from year to year, and this has been the case with Bitcoin. Bitcoin’s returns over the past decade are as follows:
|
Year |
Bitcoin Performance |
|
2013 |
5,516% |
|
2014 |
-58% |
|
2015 |
37% |
|
2016 |
119% |
|
2017 |
1,300% |
|
2018 |
-73% |
|
2019 |
92% |
|
2020 |
302% |
|
2021 |
58% |
|
2022 |
-65% |
|
2023 |
156% |
In its first full year of existence, Bitcoin soared over 5,000%, climbing from $13 to $1,100. Its returns would attract the general public and investors' attention, allowing Bitcoin to become a significant financial asset.
Bitcoin’s Multi-Year Returns
While Bitcoin’s annual returns are impressive, its multi-year returns are extraordinary. For example, from January 1, 2013, to December 31, 2023, Bitcoin’s price increased from $20 to $42,000. This represents a return on investment of 20,990%. Here’s how Bitcoin performed over the previous 15, 10, 5, and 3-year periods:
|
Initial value |
Final value |
ROI (%) |
|
|
15 years (2008-2023) |
$0.000764 |
$29,310.44 |
3,839,387,524,500% |
|
10 years (2013-2023) |
$1,106.75 |
$29,310.44 |
2,546.8% |
|
5 years (2018-2023) |
$7,438.67 |
$29,310.44 |
294.1% |
|
3 years (2020-2023) |
$11,246.20 |
$29,310.44 |
160.6% |
|
1 year (2022-2023) |
$22,626.83 |
$29,310.44 |
29.54% |
Bitcoin Investment Strategies: Timeframe
Bitcoin’s past performance does not indicate future results, but it’s returns are undoubtedly impressive compared to traditional investments. Investors should consider their investment timeframe when deciding how to invest in Bitcoin.
If you want to invest in the long haul, it may make sense to put the dollar-cost average (DCA) into Bitcoin over time and ignore the day-to-day price fluctuations. If you’re looking to make a trade based on Bitcoin’s current price or volatility, it’s essential to do your research and understand that the market can turn quickly.
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How Should Investors Think About Long-Term Bitcoin Returns?
Bitcoin has shown an unusually high average annual return of 49% over the last 10 years. Morgan Stanley strategists believe this performance will unlikely be repeated in the next decade.
What Does The Future Hold For Bitcoin?
Instead of treating Bitcoin like stocks or bonds, which are often valued based on projected cash flows, it may be useful to look at it as commodities, which are priced based on supply and demand.
With this framework in mind, investors can consider three factors:
Supply
This is the easiest to forecast, as the software underlying Bitcoin's network controls its growth. Today, the Bitcoin money supply stands at 19.6 million and is set to grow to 20.7 million in the next 10 years. The governing algorithm enforces this supply limit and cannot change unless users agree.
Demand
This is the product of two assumptions:
- Addressable market
- Penetration
The Addressable
The addressable market refers to the wealth that could be stored in Bitcoin. For simplicity, investors can focus on liquid assets that can quickly be converted to cash, such as checking accounts, savings accounts, and other short-term saving vehicles such as certificates of deposit. What’s known by economists as the “M2” money supply— as well as gold and Bitcoin. Today, we see around $100 trillion stored globally in such assets, based on current prices.
Penetration
Penetration can refer to the percentage of overall wealth stored in Bitcoin. Simply dividing Bitcoin’s market capitalization by $100 trillion in wealth suggests it has a penetration of about 1%. Investors may define “penetration” as the percentage of investors exposed to Bitcoin in their portfolio.
Four Scenarios For Bitcoin’s Long-Term Returns
Bitcoin supply growth has the least uncertainty and is expected to grow 0.6% yearly for the next decade. The development of the addressable market combines near-term M2 growth with long-term average M2 growth to arrive at a ten-year estimate of 6.3% a year.
The last variable, penetration, is a wildcard and makes the most difference to long-term returns. Here are four illustrative examples, but everyone’s estimates will likely differ substantially, and we do not favor any one estimate.
1. More Bearish
Some investments initially seem popular but then fall out of favor. Scaling methods fail, or a competitor gains market share.
Monthly Bitcoin addresses peaked about three years ago at 22 million and have declined at a 4.3% annualized rate. If the loss of users continues at a similar pace, shrinking with the historical adoption curve, it would suggest a 10-year annualized return of just 1.1%.
2. Conservative
If the number of Bitcoin investors remains flat and current holders don’t increase their allocations, the price could rise because overall wealth would grow faster than Bitcoin supply, implying a 10-year annualized return of 5.7%.
3. Moderately Aggressive
You could assume that Bitcoin users will grow with the U.S. population and that younger people are likelier to adopt Bitcoin than older ones. Consider new users with similar wealth as existing users and new users who allocate the same percentage of wealth to Bitcoin as the old.
In this scenario, demand would rise by M2 growth, plus population growth, or 7.4%, suggesting a 10-year annualized Bitcoin return of 6.2%.
4. More Aggressive
Thanks to the new ETFs, Bitcoin is becoming more popular and easier to buy. Based on historical Bitcoin adoption trends, assuming that monthly active user growth moderates to 4.4% over the next four years and stays there for a decade, it would imply a 10-year % annualized return of 10.4%.
Assessing Bitcoin Risks
Recognizing that these estimates illustrate the three-variable framework is essential, and we do not endorse any of these assumptions. They do not factor in potential significant risks, such as broken encryption, which could make the system unusable, a software bug, which could increase supply, or adverse government action. These are hard to quantify and thus suggest investors err on the side of conservatism in their other assumptions. While these scenarios may be off the mark, they can still be helpful for planning.
Investors can use this framework to explore what they think will happen to the money supply, user growth, and penetration and plan accordingly. Morgan Stanley’s Global Investment Office makes no recommendation regarding whether to buy or sell Bitcoin but encourages investors to get educated. Bitcoin investment should be based on thorough research and understanding of the asset class. Investing in BTC is highly speculative and may result in a loss of the entire investment.
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