Bitcoin vs. S&P 500: Risk-Adjusted Returns Compared

The full picture, side by side

Why "risk-adjusted" changes the story

Bitcoin's total return looks like a blowout — roughly 6x the S&P's over the same stretch. But that return didn't come for free: Bitcoin's annualized volatility was about 3.7xthe S&P's, and its worst peak-to-trough drawdown was roughly 3x as deep.

Dividing each asset's annualized return by its annualized volatility gives a rough return-per-unit-of-risk figure — not a full Sharpe ratio (that would subtract a risk-free rate first), but enough to make the comparison honest. On that basis, the S&P 500's 0.81 is actually slightly ahead of Bitcoin's 0.63 — the raw return gap mostly reflects Bitcoin taking on much more risk, not converting that risk into a better risk-adjusted outcome.

What the drawdown number actually means

A 73% drawdown means an account would have needed to nearly quadruple from its low just to get back to even — and living through that decline in real time, without the benefit of already knowing the recovery happens, is where most investors abandon a position. The S&P's 25% drawdown is still a real bear market, but it's a fundamentally different experience to hold through. This is the practical case for treating Bitcoin as a smaller position sized for its own volatility rather than a like-for-like swap with an equity allocation — see How Much Bitcoin Should I Own?

Limitations

Volatility and max drawdown here are computed from month-end closing prices, which smooths over some intra-month swings — true daily-basis figures for both assets are somewhat higher than shown. The window also covers only one full market cycle including a single major crash (COVID, March 2020) — a longer sample spanning multiple rate cycles and recessions could shift both assets' risk profile in either direction. Past volatility and drawdown are not a ceiling on future ones for either asset.