Introduction
Standard Chartered has recently presented a provocative analysis suggesting that Bitcoin (BTC) may deserve a position among the world’s top tech stocks rather than merely serving as a hedge against traditional finance (TradFi). According to Geoffrey Kendrick, head of digital assets research at Standard Chartered, Bitcoin currently behaves more like a tech stock—exhibiting strong short-term correlation with the Nasdaq—than as a safe haven.
Key Takeaways
Tech Stock Behavior: Bitcoin’s performance closely mirrors that of tech stocks, with a notable correlation to the Nasdaq.
Mag 7B Index: By replacing Tesla with Bitcoin in the Magnificent 7 group, Standard Chartered’s hypothetical “Mag 7B” index delivered higher returns and lower volatility.
Improved Risk-Return Profile: Since December 2017, the Mag 7B index has outperformed the original Mag 7 by approximately 5% and has achieved an information ratio of 1.13 versus 1.04.
Institutional Adoption: The launch of spot ETFs has reduced transaction costs for Bitcoin, supporting broader institutional adoption and potentially accelerating its growth as a key component in global portfolios.
Detailed Analysis
Bitcoin’s Evolving Role
Historically viewed as a hedge against inflation and financial instability, Bitcoin is now demonstrating characteristics more akin to those of leading tech stocks. Standard Chartered’s research shows that Bitcoin exhibits:
High Correlation with the Nasdaq: Its price movements increasingly resemble those of established technology companies.
Lower Transaction Costs: With the advent of spot ETFs, the costs associated with trading Bitcoin have become comparable to those of other tech giants.
The Mag 7B Hypothetical Index
To test this new perspective, Standard Chartered created a hypothetical index—Mag 7B—by substituting Tesla (NASDAQ: TSLA) with Bitcoin in the well-known Magnificent 7 group. Key findings include:
Ranking by Market Capitalization: Bitcoin would rank sixth in the new index, positioned ahead of Tesla but behind giants like Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT).
Superior Performance: Since December 2017, Mag 7B outperformed the original Magnificent 7 index by about 5%.
Reduced Volatility: The Mag 7B index achieved lower average annualized volatility, resulting in an information ratio of 1.13 compared to 1.04 for the traditional index.
Potential for Portfolio Diversification: These findings imply that incorporating Bitcoin in place of Tesla could have enhanced the risk-return profile of tech-focused portfolios.
Institutional Adoption and Market Implications
Standard Chartered’s analysis suggests that as Bitcoin becomes increasingly institutionalized, it could fulfill multiple roles:
Hedge Against TradFi Risks: Its inherent value and resilience in market downturns.
Growth Allocation: A robust, high-performing asset in tech-centric portfolios.
The improved cost dynamics due to spot ETFs could further drive institutional inflows, adding fresh capital to Bitcoin and solidifying its position in diversified investment strategies.
Real-Time Market Insights
For investors looking to monitor these developments, consider using these real-time data resources:
Crypto Currency Free APIAccess real-time price data, market capitalization, and volume trends for Bitcoin to assess its performance relative to tech stocks.
Company Rating APIStay updated on analyst ratings and performance metrics for major tech stocks within the Magnificent 7, which can serve as a benchmark when evaluating Bitcoin’s evolving role.
Conclusion
Standard Chartered’s Mag 7B analysis challenges traditional views by suggesting that Bitcoin’s performance and lower transaction costs now align it more closely with tech stocks than with safe-haven assets. With Bitcoin potentially outperforming established tech giants over the long term, its inclusion in diversified portfolios could offer a compelling risk-return trade-off. As institutional adoption increases, Bitcoin’s multifaceted role in global investor portfolios is likely to expand.
