Bitcoin Outperforms S&P 500, Gold, Nasdaq 100 With 375.5% Gains Over Three Years

Historically, sovereign bonds such as US Treasuries, Japanese government bonds, and German Bunds have been favored by risk-averse investors due to their perceived minimal risk and steady returns. However, the narrative around Bitcoin as an alternative to bonds has been growing since its emergence 13 years ago. The interplay between the Federal Reserve’s balance sheet and the M1 and M2 money supply is a significant factor in understanding why some investors are shifting to Bitcoin. The M1 money supply includes the most liquid assets like cash and demand deposits, while the M2 money supply is a broader measure that includes savings deposits and retail money market funds. The Federal Reserve’s actions on its balance sheet directly influence the M1 and M2 supply, affecting inflation, bond yields, and investor confidence in fiat assets.

In recent years, the Federal Reserve has maintained a high federal funds rate between 4% and 5%, signaling that rate cuts might not be imminent. On May 26, 2025, Moody’s downgraded the US debt rating from AAA to AA1, citing fiscal instability and political dysfunction. Additionally, the Japanese bond crisis of 2024-2025 highlighted how shifts in bond demand and yields can impact investor sentiment and the safe haven status of government debt. In this macroeconomic scenario, Bitcoin is increasingly seen as a hedge against inflation.

As of June 13, Bitcoin has outperformed the S&P 500, gold, and the Nasdaq 100 by posting 375.5% gains over a three-year period, compared to 59.4%, 85.3%, and 86.17% respectively. The US Securities and Exchange Commission’s approval of spot Bitcoin exchange-traded funds (ETFs) on January 10, 2024, marked a significant milestone for Bitcoin’s role in modern investment portfolios. The 12 Bitcoin spot ETFs trading in the US have total assets under management (AUM) of $132.5 billion as of June 11, 2025.

According to calculations aligned with the modern portfolio theory (MPT), the Sharpe ratio of a portfolio can be optimized around a 16% allocation to Bitcoin. At this level of portfolio allocation, the Sharpe ratio for BTC would be around 0.94, compared to the estimated Sharpe ratio of US Treasury bonds, which is between 0.3 and 0.5. This means US Treasury bonds offer less return for the same level of risk, making Bitcoin a more efficient investment if one is comfortable with the higher risk.

Billionaire investors like Larry Fink, Stanley Druckenmiller, and Paul Tudor Jones are increasingly turning to Bitcoin as a hedge against inflation and government mismanagement. Fink sees Bitcoin as a modern alternative to gold amid what he calls the highest embedded inflation in decades. Druckenmiller not only supports Bitcoin but has openly shorted US bonds, criticizing the Fed’s rate policy as disconnected from market reality. Meanwhile, Jones warns of spiraling US debt and expects policymakers to inflate their way out, reinforcing Bitcoin’s appeal as a store of value. Collectively, these Wall Street titans are signaling a shift: long Bitcoin, short bonds.

The Bitcoin network’s inception led to the birth of a new financial asset class. BTC is one of the only assets in the world that is immutable, provenly scarce, and has a permanently capped supply. As of June 11, 2025, over 19.8 million BTC has been minted, accounting for 94.6% of the total supply. In contrast, the supply of sovereign bonds is set by the government, which can issue new bonds when needed, thus there is no perception of scarcity for bonds issued by the government.

Additionally, sovereign bonds are heavily limited by a few factors, especially for retail investors. Retail investors often cannot access government bonds directly and have to rely on intermediaries like asset managers, banks, or brokers. These bonds are typically cleared through institutional settlement houses like Euroclear and Clearstream, which aren’t designed for retail usage. Government bonds are only available to investors during the trading hours of that particular country, which doesn’t allow investors to unwind their position outside market hours, on weekends, and on bank holidays. Purchasing foreign sovereign bonds requires investors to have access to international brokerage accounts and also involves currency risk and significant geopolitical risk.

Since Bitcoin is a decentralized and accessible asset with 24/7 availability, it overcomes many of the challenges that investing in sovereign bonds could pose. Additionally, as crypto wallets continue to improve user experience and simplify onboarding, and as access to both centralized and decentralized exchanges expands, Bitcoin is becoming even more accessible at a rapid pace. This ease of access, when compared to sovereign bonds, is bound to aid investors contemplating the shift from sovereign bonds to BTC.