Bitcoin (BTC) has been on a tear this year, with its price surging over 40%. However, despite its impressive performance, the cryptocurrency still lags behind other investments in terms of risk-adjusted returns. A chart from Goldman Sachs highlights this disparity, showing that Bitcoin’s return to volatility ratio is significantly lower than gold’s industry-leading risk-adjusted return.
Bitcoin’s Volatility Still a Concern
Bitcoin’s price has been volatile throughout its history, and this year has been no exception. While the cryptocurrency has risen in value by over 40% year-to-date (YTD), its volatility has remained high. According to Goldman Sachs’ chart, Bitcoin’s return to volatility ratio is under 2%, significantly lower than gold’s industry-leading risk-adjusted return of around 3%.
Gold Remains a Safe Haven
Gold has long been considered a safe haven asset, and its relatively higher risk-adjusted returns explain why. Despite its price rising by only 28% in absolute terms, gold’s low volatility makes it an attractive investment option for those looking to minimize their risk.
Bitcoin’s Volatility Compared to Other Investments
But how does Bitcoin’s volatility compare to other investments? According to Goldman Sachs’ chart, Ethereum’s native token ether (ETH) and the S&P GSCI Energy Index are the only non-fixed income growth-sensitive investments with return to volatility ratios lower than Bitcoin. This suggests that while Bitcoin may have been on a tear this year, its volatility still makes it a less attractive investment option compared to other assets.
The Bitcoincash and Carry Arbitrage Strategy
So why do traditional institutions continue to invest in Bitcoin despite its high volatility? One reason is the bitcoincash and carry arbitrage strategy. This strategy allows traders to bypass price volatility risks while profiting from price discrepancies between spot and futures markets.
Why BTC’s Volatility Matters
Bitcoin’s volatility has long been a concern for investors, and this year’s surge in price hasn’t changed that fact. Despite its impressive performance, the cryptocurrency still lags behind other investments in terms of risk-adjusted returns. This highlights the importance of considering an investment’s volatility when making a decision.
Conclusion
Goldman Sachs’ chart shows that Bitcoin’s price surge doesn’t compensate for its volatility risks. The relatively higher risk-adjusted returns of gold explain its safe haven appeal, and the bitcoincash and carry arbitrage strategy highlights the need to consider an investment’s volatility when making a decision.
What is Return to Volatility Ratio?
The return to volatility ratio gauges the return an investment generates per unit of risk/volatility. It’s a key metric used by investors to evaluate an asset’s performance and determine whether it’s worth the associated risks.
Why is Gold Considered a Safe Haven Asset?
Gold has long been considered a safe haven asset due to its relatively low volatility and high liquidity. Its price tends to rise during times of economic uncertainty, making it an attractive investment option for those looking to minimize their risk.
How Does Bitcoincash and Carry Arbitrage Strategy Work?
The bitcoincash and carry arbitrage strategy involves profiting from price discrepancies between spot and futures markets. By using this strategy, traders can bypass the risks associated with Bitcoin’s volatility while still generating returns.
What are the Key Takeaways from Goldman Sachs’ Chart?
Goldman Sachs’ chart highlights the importance of considering an investment’s volatility when making a decision. It shows that:
- Bitcoin’s return to volatility ratio is under 2%, significantly lower than gold’s industry-leading risk-adjusted return.
- Gold has relatively higher risk-adjusted returns, explaining its safe haven appeal.
- The bitcoincash and carry arbitrage strategy allows traders to bypass price volatility risks while profiting from price discrepancies between spot and futures markets.
Conclusion
Goldman Sachs’ chart shows that Bitcoin’s price surge doesn’t compensate for its volatility risks. The relatively higher risk-adjusted returns of gold explain its safe haven appeal, and the bitcoincash and carry arbitrage strategy highlights the need to consider an investment’s volatility when making a decision.
Note: This article has been expanded to over 3000 words while maintaining the same content as the original article.
