Is Bitcoin a safer asset? An analysis of investment returns in the context of a 5-year strategy

Investing is not just about choosing an asset, but above all about understanding what trading involves and which strategies truly generate profits. The recent discussion sparked by Peter Schiff regarding Bitcoin’s financial results raises a serious question for firms like Strategy: is consistently accumulating BTC over five years really an investment or just a cosmetic change to the portfolio?

Problem: 3% average annual return with 16% net profit - what doesn’t add up?

The shocking revelation shows that Strategy’s regular Bitcoin (dollar-cost averaging) strategy yielded an average return of just 3% per year, despite an unrealized total profit of 16%. How is this possible? The key lies in the average purchase price at $75,000 per BTC and in passively waiting for value appreciation.

For comparison, the current Bitcoin price is $90,780, indicating a 21% increase from the average entry price. At the same time, Bitcoin has fallen 4.05% over the past year, demonstrating the current unpredictability of the cryptocurrency market. Such volatility makes calculating actual annual returns require deep time-based analysis and entry point considerations.

Dollar-cost averaging strategy - why Schiff is right with reservations

What does trading with a more conservative approach to the market involve this time? Dollar-cost averaging means systematically investing fixed amounts at regular intervals, regardless of the price. The theory sounds beautiful – it smooths volatility, reduces emotions. The practice? It ties you to changing market standards.

Schiff argues that this approach reduces potential gains during uptrends. If Bitcoin surges sharply, the average purchase cost remains high. Over the last five years, the crypto market has experienced unprecedented volatility – from crashes to record highs above $90,000 in 2024. An investor entering at the optimal moment could have earned much more.

On the other hand, an investor who entered at the peak would have lost significantly more. This is where the balance between market timing and investment discipline comes into play.

Performance comparison: Bitcoin vs. traditional assets over this five-year period

The history from 2020 to 2025 shows dramatically different trajectories for various asset classes:

• Gold: Increase of about 50-60% due to inflation and geopolitical uncertainty
• S&P 500: Cumulative growth exceeding 100% despite several significant corrections
• Bitcoin: Growth over 200% since the pandemic lows, but with extreme fluctuations
• Real estate: Volatility depending on the sector, with pressure on the housing market
• Bonds: Low returns but stability

It seems the S&P 500 delivered better returns with less volatility. But wait – this is analyzing only the last five years. Many analysts suggest that a minimum horizon for a true assessment should be seven to ten years, especially for highly volatile assets.

Why does 3% annually sound so disappointing?

Schiff’s methodology boils down to dividing the 16% total profit by five years. This simplification – mathematically: 16% ÷ 5 years = 3.2% annually. The problem is that assuming linear growth rarely holds true in practice.

Realistically – if someone invested smaller amounts in 2020 (when Bitcoin was much cheaper), and larger sums in later years, the return rate could be completely different. What makes trading an intelligent approach? Understanding that simple math is not enough – psychology, entry timing, and market reading skills must come into play.

Psychological aspect and investment discipline

Few investors can maintain discipline during a bear market. During the market declines of 2022, many sold at losses. Those who held their positions or bought additional are now seeing gains.

Strategy demonstrated discipline in this area. Comparing directly to an impulsive investor who sold in panic, the 3% annual return looks much better. But comparing to an investor who bought at the bottom and sold at the top? Here, 3% is a losing strategy.

The role of diversification in portfolio building

Modern portfolio theory states clearly: don’t put all your eggs in one basket. Despite its potentials, Bitcoin should not be the only alternative. A diversified portfolio combining 5-15% cryptocurrencies with traditional assets reduces risk without drastically lowering potential returns.

Additionally, one must consider:

• Taxes on gains (unrealized gains are not income)
• Storage and security costs
• Transaction fees
• Risk of hacking or loss of access

Regulatory outlook and future

The regulatory environment evolves faster than Bitcoin. New regulations can both support and restrict growth. This introduces an element of uncertainty that traditional assets are less exposed to.

However, Bitcoin’s long-term fundamentals – decentralization, censorship resistance, limited supply – remain unchanged. Lightning Network and other technological innovations can improve usability regardless of price fluctuations.

Conclusions: What should an investor really know?

Peter Schiff is right that 3% annually is a modest return. But he is also right that the market is much more complex than numbers suggest. Investors should:

1. Define their time horizon – five years is too short for a full assessment
2. Understand their risk tolerance – Bitcoin is not for the faint-hearted
3. Diversify – don’t put everything into one asset
4. Educate themselves – know what trading involves and strategies before entering
5. Think long-term – emotions are the enemy of success

Bitcoin at $90,780 remains a controversial asset. Is it the future of finance or a bubble? The answer depends on your time horizon and risk management skills.