Bitcoin Outperforms Tesla in Hypothetical Tech Index by 5%

Standard Chartered has conducted a hypothetical test, swapping tesla with Bitcoin in the 'Mag 7' index, which comprises the seven largest technology companies by market capitalization. The test, referred to as 'Mag 7B', revealed that the index with Bitcoin replacing Tesla delivered higher returns and lower volatility compared to the original lineup. This finding suggests that Bitcoin could potentially serve as both a growth asset and a hedge against market volatility, offering investors a dual benefit.

The results of the test indicate that Bitcoin, if included in the 'Mag 7' index, would rank sixth by market capitalization among the top seven technology companies. This positioning highlights Bitcoin's growing significance in the global financial landscape and its potential to compete with established tech giants. The lower volatility observed in the 'Mag 7B' index suggests that Bitcoin's price movements may be less erratic than those of Tesla, providing a more stable investment option.

The implications of these findings are significant for investors and financial institutions. The inclusion of Bitcoin in a major index like 'Mag 7' could lead to increased institutional adoption and investment in the cryptocurrency. This, in turn, could drive further growth and stability in the Bitcoin market, as more investors seek to capitalize on its potential for higher returns and lower volatility. Additionally, the test results challenge the traditional notion of Bitcoin as a highly volatile asset, positioning it as a viable alternative to established tech stocks.

The test conducted by Standard Chartered underscores the evolving role of Bitcoin in the financial markets. As more institutions recognize its potential, Bitcoin's integration into mainstream investment portfolios is likely to accelerate. This shift could reshape the investment landscape, offering investors new opportunities for growth and diversification. The findings also highlight the need for continued research and analysis into the performance and characteristics of Bitcoin and other cryptocurrencies, as they become increasingly integrated into the global financial system.

Geoffrey Kendrick, global head of digital assets research at Standard Chartered Bank, noted that Bitcoin is "almost always" more correlated to the Nasdaq than to gold in the short term. This correlation leads to the idea that Bitcoin could be included in a basket of large tech stocks. Kendrick's hypothetical Mag 7B index removes Tesla — currently the smallest member in the index by market cap — and replaces it with Bitcoin to test whether Bitcoin should be considered a tech stock as well as a hedge against the risks and issues facing traditional finance.

Ask Aime: How can Bitcoin replace Tesla in the Mag 7 index?

Kendrick's analysis shows that Mag 7B outperformed the Mag 7 index by about 5% since December 2017, starting from Bitcoin’s then-all-time high just below $20,000. Mag 7B beat Mag 7 in five of the past seven years, with average annual returns about 1% higher. Additionally, Mag 7B showed lower volatility than Mag 7 in every single year of the analysis, with an average of nearly 2% less volatility. This gave Mag 7B a higher information ratio: 1.13 versus 1.04, suggesting that Mag 7 portfolios would have benefited from including Bitcoin and removing Tesla over the past seven years.

Kendrick also noted that Bitcoin’s inclusion would be even more beneficial this year. Since the launch of spot Bitcoin ETFs in early 2024, trading Bitcoin has become as seamless and cost-effective as trading other Mag 7 stocks. Kendrick added that Bitcoin’s volatility-adjusted behavior has looked similar to Nvidia’s since President Donald Trump’s January 2025 inauguration, while Tesla now trades more like ether. This shift in trading behavior further supports the idea that Bitcoin could serve multiple purposes in investor portfolios, opening up the possibility of even more institutional buying.

Looking ahead, Kendrick expects a positive outlook for Bitcoin and crypto as markets hope for a milder U.S. tariff announcement. With the Nasdaq coming off its worst quarter, he anticipates some portfolio rebalancing that could boost buying. Kendrick's analysis suggests that a higher Nasdaq will equal higher Bitcoin, with a focus on $90,000. Bitcoin is currently trading at around $88,300.