If You'd Invested $1,000 in Bitcoin (BTC) 5 Years Ago, Here's How Much You'd Have Today

Key Points

• A $1,000 Bitcoin purchase on Aug. 20, 2020, would be worth roughly $9,784 five years later.

• The bull run included a roughly 75% drawdown by the end of 2022 -- followed by another strong rebound.

• Bitcoin may trend higher from here, but risks remain, and there may be sharp price corrections.

• 10 stocks we like better than Bitcoin ›

Let's say you had $1,000 of spare cash to invest on Aug. 20, 2020. If you had invested that money in the popular Vanguard 500 Index Fund (NYSEMKT: VOO) and enabled dividend reinvestments, that investment would be worth $2,038 today.

A double in five years? That's a compound annual growth rate (CAGR) of 15.3%. Not too shabby!

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The tech-heavy Invesco QQQ Trust (NASDAQ: QQQ) would have served you slightly better. The index fund, which tracks the performance of the Nasdaq-100 market index, showed a total return of $2,097 over the same period.

However, both wealth-building stock market trackers look sleepy next to the skyrocketing cryptocurrency Bitcoin (CRYPTO: BTC). A $1,000 Bitcoin investment in the summer of coronavirus lockdowns would be worth $9,784 today:

Bitcoin Price data by YCharts

How Bitcoin earned its returns

Bitcoin's path to these market-crushing returns wasn't smooth. The digital currency soared in 2020 and 2021, fell back a hair-raising 75% by the end of 2022, and found a second wind after that trough.

These days, Bitcoin is exploring fresh all-time highs on a weekly basis, but in a nerve-wrackingly volatile way. Last year's halving event almost disappears in the ruckus of market-moving Bitcoin news. The introduction of spot Bitcoin exchange-traded funds (ETFs) had a calming effect on the underlying cryptocurrency, and recent support from the U.S. government also helped.

All told, Bitcoin ETFs sport a beta value of 2.8. That makes Bitcoin about three times as volatile as the S&P 500 (SNPINDEX: ^GSPC) stock market index, which underpins Vanguard's VOO fund.

Can Bitcoin keep beating Wall Street?

My time machine is in for repairs, so I can only speculate about the next five years.

However, Bitcoin's anti-inflationary design should combine with rising cryptocurrency usage, adding bullish weight to the supply and-demand balance. So the next half-decade probably won't see another ninefold price gain, but Bitcoin's squiggly chart should generally trend higher again.

Anders Bylund has positions in Bitcoin and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Bitcoin and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.