Bitcoin will prove to be a better benchmark than the S&P in the coming decade
Investors and capital allocators need to re-examine how they invest in tech.
I really enjoyed the chaos DeepSeek has introduced to the world. As an entrepreneur, it was a stark reminder that you can compete with anyone and that David can beat Goliath! This is even crazier when you rewatch Sam Altman’s arrogant response saying "It's totally hopeless to compete with us”.
From an investor/capital allocator perspective, it has clarified why tech stocks are considered risk-on assets. This isn't just a minor blip; it's a wake-up call that exposes the risk profile of tech stocks. Nvidia experiencing the largest single-day capital evaporation in the history of Wall Street is very telling, 589 Billion USD to be exact.
If we look broadly at the S&P 500, the risk is even more concentrated. Currently, the S&P is hovering at around 230% of GDP, surpassing even the heights of the 2000 tech bubble and the 1929 crash. And if that's not enough, the "Magnificent Seven" stocks, Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla, now make up 33% of the S&P 500 as of January 2025. These tech giants aren't just leading the pack; they're practically the whole show. They've contributed to over half of the S&P's returns since late 2022. That level of concentration risk is staggering.
Bitcoin's correlation with high-growth, risk-on assets is a symptom of information asymmetry. For example, understanding Nvidia requires expertise in multiple advanced fields like computer science (GPU architecture, parallel computing, AI algorithms) and material science (semiconductor design, fabrication processes). Mastering these areas could take 5-10 years. In contrast, Bitcoin’s fundamentals, proof of work, decentralization, and monetary theory, are far simpler. Reading Dr. Saifedean Ammous The Bitcoin Standard can give you a solid grasp of its core ideas in weeks. Nvidia’s risk profile is tied to its technical complexity and competitive landscape, while Bitcoin’s value is rooted in its simplicity and scarcity.
Investors and capital allocators need to re-examine how they invest in tech. Passive flows into index and growth stocks are riskier than many realize. Bitcoin, on the other hand, is simpler to grasp; its value comes from adoption and scarcity, not complex engineering, and it is much less likely to be disrupted.
Here’s why: you cannot create another Bitcoin. Many have tried, as evidenced by the tens of thousands of altcoins, but Bitcoin remains unique. It is a system of rules without rulers, there’s no CEO or company controlling it. The code is fixed and immutable, and anyone who wants Bitcoin must contribute time and energy to secure the network. This immaculate conception and ground-up distribution make Bitcoin the world’s first truly digital commodity, bound by the rules of math and physics. To me, it’s the least risky investment over a long time horizon, and short-term price movements should not matter as much.
