Bitcoin Inclusion in “Magnificent 7” Index Enhances Performance, Standard Chartered Analysis Shows
Standard Chartered Bank’s research indicates that incorporating Bitcoin into a modified “Magnificent Seven” index can lead to improved investment outcomes.
Their hypothetical “Mag 7B” index, which substitutes Tesla with Bitcoin, demonstrates increased returns and decreased volatility.
This analysis highlights Bitcoin’s potential role as both a technology asset and a hedge against risks in traditional financial markets.
Hypothetical Index Swaps Tesla for Bitcoin
Standard Chartered Bank created the “Mag 7B” index as a theoretical model.
This index replaces Tesla shares with Bitcoin, departing from the conventional “Magnificent Seven” index.
The original “Magnificent Seven” tracks the stocks of major U.S. technology companies: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.
Jeffrey Kendrick, Head of Research at Standard Chartered, proposed Bitcoin as a viable addition, noting its stronger short-term correlation with stock markets compared to gold.
Kendrick stated that including Bitcoin could attract more institutional investment, as the asset could fulfill diverse investor needs.
“Mag 7B” Outperforms Original Index in Key Metrics
Evaluations of the “Mag 7B” index reveal reduced volatility and increased returns when compared to the standard “Mag 7” index.
According to Kendrick, these results suggest Bitcoin’s dual nature.
It can serve as a risk hedge against traditional finance (TradFi) and also function as a relevant component within technology investment portfolios.
Specifically, the “Mag 7B” index achieved an average annualized return 1% higher than the “Mag 7.”
“Mag 7B” also showed stronger performance in five of the past seven years.
Furthermore, volatility in the “Mag 7B” was, on average, 2% lower than the original index.
Bitcoin’s Institutionalization and Market Behavior
For a robust comparison, Kendrick used December 2017 as the starting point for analysis.
This starting point aims to ensure a more objective assessment of performance.
Kendrick posits that Bitcoin’s market behavior reflects increasing institutional adoption.
He observes trading patterns for Bitcoin comparable to NVIDIA shares while suggesting Tesla‘s trading patterns are more similar to Ethereum.
Also Read: Saylor Signals Potential Bitcoin Acquisition Following $711M Capital Raise
