Bitcoin vs Traditional Finance: Historic Comparison

Key Takeaways

• Bitcoin has outperformed every traditional asset class over the past decade, but its margin of outperformance has been steadily narrowing
• The asset's extreme volatility is arguably its most defining characteristic, an essential trade-off for outsized gains.
• While Bitcoin is often seen as a hedge, its correlation with traditional financial markets has increased during major market cycles.

Introduction

Comparing Bitcoin to traditional finance may once have seemed like a strange thing to do. But as crypto has matured, this comparison has become more relevant.

Now that Bitcoin has reached a more mature stage in its lifecycle—with institutional adoption, regulatory attention, and mainstream access—the extreme speculation of its early days has eased. This brings an important question into focus: Has Bitcoin still outperformed in recent years, even with its seemingly reduced risk profile?

Comparative Price Action

Bitcoin has unquestionably delivered substantial opportunities since launching in early 2009. But it’s worth noting that many of these gains came in its early, ultra-speculative years when risk was extremely high.

More recently, the gap in performance between Bitcoin and traditional indexes has narrowed. Let’s look at what would’ve happened if someone invested $10,000 in BTC, the S&P 500, the Nasdaq 100, and the ASX 100 over two common timeframes—five and seven years ago.

	5-Year Return	5-Year Value Today	7-Year Return	7-Year Value Today
Bitcoin (BTC)	~940%	~$104,000	~1,020%	~$112,000
Nasdaq 100	~110%	~$21,000	~163%	~$26,000
S&P 500	~80%	~$18,000	~91%	~$19,000
ASX 100	~25%	~$12,500	~35%	~$13,500

Note: Returns are approximate and based on historical price data as of April 9, 2025.

The data shows that Bitcoin has still been significantly outperforming major indexes over the last five and seven years. Even as the asset has matured and speculation has cooled, the returns remain well above those of the Nasdaq 100, S&P 500 and ASX 100. However, that performance comes with a level of price volatility that deters many.

Volatility Is the Trade-Off

The biggest differentiator between Bitcoin and traditional markets is volatility. BTC's price movements are often extreme to the upside and downside.

For instance, while the S&P 500 might drop 10–15% in a market correction, Bitcoin can plunge 40–60% in a matter of weeks. These kinds of drawdowns are psychologically challenging and test the resolve of even seasoned investors.

This volatility is a double-edged sword. It creates the opportunity for massive upside but also means those gains can evaporate quickly. To stay in the game, investors need a strong stomach and a long-term mindset.

Correlation With Traditional Finance

Many early Bitcoin enthusiasts touted it as a hedge—a financial asset that would move independently from equities. But over time, reality has painted a different picture.

In major bull markets, Bitcoin tends to rise alongside stocks. During bear markets, it often falls even harder. When the Nasdaq and S&P correct, Bitcoin typically corrects by more. When they rally, BTC joins the party—but again, in an exaggerated fashion.

This shows that Bitcoin is not as uncorrelated as once believed. It tends to follow the same market trends as stocks—just with much bigger moves in both directions.

Conclusion

Bitcoin and traditional financial assets represent fundamentally different investment philosophies. While TradFi is built on steady returns and lower volatility, Bitcoin offers the promise of outsized gains in exchange for immense price swings and higher risk.

For those willing to tolerate the ride, Bitcoin can offer unmatched upside. But it’s no longer the rogue outsider it once was. Its fate is increasingly tied to the same macro forces driving traditional markets.

The future of Bitcoin may still hold disruptive potential, but for now, it behaves less like a hedge—and more like an amplifier of traditional financial cycles.