Cryptocurrencies and equities are perceived as risk-laden investments, and returns might not mean much if one ignores the inherent volatility.
What Happened: Bitcoin, the world's leading cryptocurrency, has jumped 43% year-to-date, surpassing blue-chip equity indices like the S&P 500 and the Nasdaq Composite, which have grown 18.51% and 21.35% respectively.
But the King Crypto has also endured sharp corrections this year, the most recent being the Aug. 5 rout, during which it dipped below $50,000.
To get a more accurate picture, consider measuring the excess return a Bitcoin investor obtains for enduring higher volatility.
Bitcoin's Sharpe ratio, a measure of risk-adjusted returns, was -1 as of this writing, according to charting platform Trading View, suggesting that the expected return was lower than that of a risk-free investment, such as a Treasury yield.
The Sharpe ratio was 4 at the start of the month, but the subsequent downturn eroded returns.
On the other hand, AI powerhouse NVIDIA Corp. NVDA, showed a Sharpe ratio of 2.29, highlighting a better risk-adjusted performance as of this writing.
Note that Nvidia has had a blockbuster run at the equity markets this year, soaring 166% year-to-date.
Why It Matters: The diverging performance reflected Nvidia's growing appeal as a speculative, high-returning investment.
While the early August dip hurt both Bitcoin and Nvidia, the AI-based stock has recovered faster, increasing 8% over the week compared to the apex cryptocurrency’s 4.61% advance.
Price Action: At the time of writing, Bitcoin was trading at 60,752.45, up 1.71% in the last 24 hours, according to data from Benzinga Pro. Shares of Nvidia closed 0.98% higher at $128.50 during Wednesday's regular session.
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