Bitcoin's Clobbering Bank Stocks So Badly It's Not Even Funny

via ccn.com

This five-year trend looks brutal for legacy finance.

According to data published by crypto research firm Messari, bitcoin has massively outperformed the largest banking stocks in the world over the past five years.

In fact, the cryptocurrency is pummeling them so badly it’s not even funny anymore.

JPMorgan, Bank of America, Deutsche Bank, Morgan Stanley, Citigroup, and Wells Fargo have recorded total returns in the range of -89 percent to -99 percent against bitcoin since 2014.

What the data show about bitcoin

Comparing an emerging asset class in cryptocurrencies with the biggest financial institutions in the global market might look far-fetched at the current juncture.

As of July 2019, the market valuation of bitcoin remains at around $220 billion, less than three percent of the total market cap of gold, a commodity widely recognized as a safe haven asset.

Bitcoin is also a store of value and a medium of exchange, while major banks represent well-established operations that have been relatively stable throughout the past several decades, which could lessen the merit of the comparison between the two.

However, the charts indicate that since 2014, bitcoin has experienced a parabolic upside movement, surging by well over 10,000 percent against the U.S. dollar. And the crypto economy is itself growing more stable.

In recent years, particularly throughout the past ten months, the infrastructure supporting the crypto market has noticeably improved with the entrance of large institutions in the likes of Fidelity, TD Ameritrade, and E-Trade.

Crypto investment firm Grayscale’s latest annual report explicitly noted that 66 percent of the inflow of total capital came from institutional investors, suggesting a change in the landscape in the global bitcoin market.

“Institutional investors are building core strategic positions in digital assets over time and have largely viewed the 2018 drawdown as an attractive entry point. While the dollar amounts invested declined in Q4, institutional investors share of the ‘new investment pie’ was roughly consistent throughout the year,” the report read.

The strengthening infrastructure of bitcoin has made the coin, which has historically been regarded as a speculative alternative to existing safe haven assets, more compelling to a broader market of investors.

Will the asset class continue to outperform?

Earlier this week, CCN reported that emerging markets fund manager and Mobius Capital Partners founder Mark Mobius said bitcoin would become more appealing as a store of value if it continues to grow at the current rate.

“But, at the end of the day, there are many people who do believe in it and if it continues and grows, then I would probably have to be a buyer and be involved in this,” he said.

Bitcoin and the rest of the crypto market have had large pullbacks and extended periods of brutal corrections that have led many retail investors to become cautious about the asset class.

Following most corrections, the crypto market has seen that a growing number of companies come up with better solutions to facilitate the demand for the asset class with increasing regulatory clarity.

Currently, investors are anticipating the emergence of new trading venues, sophisticated custodian solutions, and well-regulated exchanges to improve the structure of the global market.

If the infrastructure supporting the crypto market grows and improves proportionally to the price of major crypto assets, the asset class as a whole could become more favorable to investors in the traditional finance sector.

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