Bitcoin Outperforms in “Magnificent 7” Index Reconfiguration by Standard Chartered

Summary

• Standard Chartered Proposes “Mag 7B” Index: The bank developed a hypothetical index, “Mag 7B,” which modifies the “Magnificent Seven” by replacing Tesla stock with Bitcoin.

• “Mag 7B” Demonstrates Enhanced Performance: Compared to the traditional “Magnificent Seven” index, “Mag 7B” simulations show both higher average annualized returns (by 1%) and reduced volatility (by 2% on average).

• Bitcoin’s Role as Tech Asset and Hedge Highlighted: The improved performance of “Mag 7B” suggests Bitcoin’s potential as a valuable technology-related investment and as a tool to hedge against risks in traditional financial markets, potentially attracting further institutional investment.

A reimagined stock index concept proposed by Standard Chartered Bank substitutes Bitcoin for Tesla within the well-known “Magnificent Seven” group, yielding notable improvements in hypothetical investment performance.

Dubbed the “Mag 7B” index, this model not only generated greater returns but also exhibited reduced fluctuations compared to the original “Magnificent Seven,” thereby spotlighting Bitcoin’s emerging role as a tech-adjacent asset and a potential safeguard against instabilities in traditional financial markets.

“Mag 7B” Index: Bitcoin Replaces Tesla for Enhanced Returns

The basis of this analysis stems from the “Magnificent Seven,” an established index comprising shares of leading U.S. technology giants.

These are specifically Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.

Jeffrey Kendrick, Standard Chartered’s head of research, explored the impact of incorporating Bitcoin into this elite grouping.

His rationale posits that Bitcoin, in the short term, displays a stronger correlation with equity markets compared to gold, a traditional safe-haven asset.

Bitcoin’s Lower Volatility and Higher Performance in Hypothetical Index

Kendrick suggests that Bitcoin’s inclusion in such an index could stimulate increased investment from institutional players.

This is due to Bitcoin’s capacity to fulfill diverse objectives for a wider spectrum of investors.

The devised “Mag 7B” index replaces Tesla shares—considered somewhat of an anomaly within the “Magnificent Seven” due to its market capitalization differing from its counterparts—with Bitcoin.

Analysis reveals that the “Mag 7B” index demonstrates both lower volatility and superior returns when juxtaposed with the conventional “Mag 7.”

Analysis Suggests Bitcoin as a Tech Portfolio Asset and Risk Hedge

Kendrick argues that these findings imply Bitcoin’s viability as a hedging instrument against risks associated with traditional finance and as a legitimate component of technology-focused investment portfolios.

Quantitatively, the “Mag 7B” index delivered an annualized return that was, on average, 1% higher.

It also showed superior performance in five out of the preceding seven years. Furthermore, the volatility of “Mag 7B” was consistently lower, averaging a 2% reduction.

To provide a robust comparison, Kendrick selected December 2017 as the starting point for analysis, ensuring a more unbiased evaluation.

He contends that Bitcoin is increasingly undergoing institutional integration.

In terms of trading behavior, he draws parallels between Bitcoin and NVIDIA stocks while suggesting that Tesla’s trading patterns more closely resemble those of Ethereum.

Also Read: Saylor’s MicroStrategy to Buy More Bitcoin, Eyes 500,000 BTC Target

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