Quarterly Mark December 2023 - 65

EXHIBIT 18
Asset Drawdowns Relative to Highs
0%
-20%
-40%
-60%
-80%
Bitcoin
-84% Drawdown
187.2% Ann. Vol
-100%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Bitcoin
S&P 500
Gold
NOTES: We start at 2011, when Bitcoin began transacting more regularly on exchanges. It is possible, however, to go all the way back to
the very first transaction on January 12, 2009. Annualized volatility is estimated using monthly returns.
SOURCE: Bloomberg and Invesco, as of December 31, 2022.
Gold
−45% Drawdown
15.9% Ann. Vol
S&P 500
−34% Drawdown
14.5% Ann. Vol
We also consider how far Bitcoin prices fall. When Bitcoin has traded below
its highs, it traded -50.1% below its highs on average. For gold, the same measure
was -23.9%. For the S&P 500, this was just -4.0%. In other words, when the price
of Bitcoin falls, it tends to fall hard, making equities-an asset class known for its
volatility-appear far less risky in comparison.
Moreover, the timing and severity of Bitcoin's drawdowns make it even riskier, as
we show in Exhibit 18.
The Bull and Bear Cases for Bitcoin Decentralized Finance Triumphs, with
Bitcoin as the Digital Store of Value
The bull case for Bitcoin assumes more widespread adoption of the
cryptocurrency. With Bitcoin's limited supply, it follows that price targets will
increase-perhaps significantly-with demand.
As a 2021 report from J.P. Morgan points out (Bloomberg 2021), if the private
investment exposure to Bitcoin were equal to that of gold, the price per Bitcoin
would reach about $140,000. Meanwhile, ARK Investment Management's 2021 Big
Ideas report (Ark Invest 2021) suggests that Bitcoin's price can increase dramatically
should S&P 500 companies allocate their cash to Bitcoin. For example, moving 1%
of current cash allocations to Bitcoin would raise Bitcoin's price to $57,500; moving
10% would raise Bitcoin's price to $575,000 (see Exhibit 19). Neither scenario seems
even remotely likely.
Quarterly Mark | 65
Percent Price Loss from High

Quarterly Mark December 2023

Table of Contents for the Digital Edition of Quarterly Mark December 2023

Quarterly Mark December 2023 - Cover
Quarterly Mark December 2023 - Inside Front Cover
Quarterly Mark December 2023 - 1
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Quarterly Mark December 2023 - Back Cover
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