Bitcoin five-year investment return review: The complex story behind the 3% annualized yield

Recently, financial commentators conducted an in-depth assessment of Strategy company’s Bitcoin holdings, with one core finding sparking widespread industry discussion: the company has been accumulating BTC through a dollar-cost averaging strategy over the past five years, with an average annualized investment return of only 3%. This data, in the context of long-term cryptocurrency allocation being closely scrutinized, offers investors a new perspective.

Key Variables in Investment Return Calculations

The Strategy report indicates an average purchase price of $75,000 per Bitcoin, with the current holdings showing approximately 16% unrealized gains. However, when this profit is smoothed over a five-year investment cycle, the annualized return is relatively modest. Several important factors underpin this phenomenon.

Bitcoin’s current price fluctuates around $90.59K, still below its all-time high of $126.08K. Calculating based on Strategy’s average cost, the profit potential is indeed heavily influenced by the timing of entry.

The Dual Effects of Dollar-Cost Averaging

Strategy’s adopted dollar-cost averaging (DCA) approach aims to mitigate market timing risk. Investors buy a fixed amount regularly regardless of price levels. This disciplined accumulation provides psychological advantages, helping investors avoid emotional decision-making.

However, this strategy also introduces a clear cost dilution effect. Continuous purchases during high-price periods raise the average cost basis of the portfolio. Over five years, Bitcoin experienced significant volatility—from post-pandemic recovery, inflation pressures, to monetary policy shifts—making the timing of purchases a major factor affecting overall investment performance.

Impact of Time Horizon on Performance Evaluation

A five-year period is considered a medium-term investment horizon. Many asset management professionals recommend evaluating highly volatile assets over seven to ten years or more. Short-term performance data often fails to accurately reflect long-term potential.

The consensus in financial planning is that patient, long-term investors tend to outperform short-term traders. Historical evidence supports this principle across all asset classes. As an emerging asset, Bitcoin requires an even longer observation period to draw meaningful conclusions.

Cross-Asset Performance Comparison Framework

When evaluating Bitcoin’s 3% annualized return, it must be benchmarked against other assets over the same period. Market performance from 2020 to 2025 shows clear differentiation:

Traditional safe-haven assets — Gold steadily appreciated during this cycle, providing a relatively stable store of value.

Broad stock indices — The S&P 500 demonstrated a compounded growth trend despite multiple corrections.

Real estate market — Performance varied significantly between residential and commercial properties, heavily influenced by regional factors.

Government bonds — Fixed income returns fluctuated with interest rate policies but remained relatively controlled in risk.

Any effective asset comparison must be based on the same timing and allocation strategies. The high volatility of cryptocurrencies means that small differences in entry points can lead to substantial variations in investment returns.

Volatility Management and Risk Tolerance Alignment

Bitcoin’s characteristics include high volatility coupled with high potential returns. Investors with different risk preferences should evaluate this asset differently:

Risk-averse investors tend to prefer traditional assets with lower volatility, even if their long-term returns are comparatively modest, as stability provides psychological comfort.

Risk-tolerant investors are willing to accept larger price swings in pursuit of potentially higher long-term gains.

The psychological aspect of investing is often underestimated. Maintaining discipline during market downturns is challenging for many. The ability to stick to a strategy amid volatility directly influences the realization of long-term investment returns.

Positioning Cryptocurrency within a Diversified Portfolio

Modern portfolio theory emphasizes diversification across assets with low correlations. Bitcoin’s price drivers differ markedly from traditional investments. Many financial advisors recommend allocating only 2%-5% of a diversified portfolio to cryptocurrencies to balance potential upside with risk management.

Beyond simple annualized return figures, investors should consider:

• Tax implications: Cryptocurrency transaction taxation varies across jurisdictions
• Storage costs: Expenses related to cold wallets, custodial services, etc.
• Security considerations: Risks associated with self-custody versus institutional custody
• Regulatory trends: Ongoing evolution of regulatory frameworks worldwide

These factors can erode net investment returns and should be incorporated into comprehensive assessments.

Technological Developments and Fundamental Support

Discussions about Bitcoin’s value should extend beyond short-term price fluctuations and annualized return data. Its network security, decentralization, and global adoption continue to grow steadily. Technologies like Lightning Network enhance Bitcoin’s practicality as a payment system.

Fundamental improvements support long-term value expectations, even if short-term prices are disappointing. Focusing solely on annualized returns risks overlooking these critical development dimensions.

Regulatory Environment and Macroeconomic Context

The outlook for cryptocurrency investments is profoundly influenced by the global regulatory landscape. Governments worldwide are formulating rules that will materially impact future returns. Regulatory uncertainty adds complexity to long-term planning.

Macroeconomic factors—interest rate policies, inflation trends, geopolitical risks—affect all asset classes, including traditional and digital assets. A comprehensive investment analysis must incorporate these broader contextual elements.

Personalized Principles for Investment Decisions

Bitcoin’s annualized return should ultimately align with an individual’s risk tolerance, investment horizon, and financial goals. Single data points on returns are just one dimension of complex financial decision-making.

Constructing a reasonable portfolio requires balancing multiple objectives across traditional and emerging assets. For most investors, diversification is preferable to concentrated bets, regardless of how attractive the potential returns may seem.

Strategy’s dollar-cost averaging approach, despite yielding a relatively modest five-year annualized return, demonstrates a systematic and disciplined investment method. This approach has intrinsic value for individual investors, as it helps avoid emotional trading pitfalls.

The key takeaway is that investors should clearly recognize: Bitcoin’s investment performance is jointly influenced by variables such as entry timing, accumulation strategy, and time horizon. Relying solely on a single percentage figure cannot fully capture its investment value.