Standard Chartered has built a hypothetical version of the “Magnificent 7” tech index called “Mag 7B”—with bitcoin in and Tesla out—and found that it has higher returns and lower volatility than the original Mag 7 index.
Bitcoin BTC +1.35%
is "almost always" more correlated to the Nasdaqthan to gold in the short term, and this correlation leads to the idea that bitcoin could be included in a basket of large tech stocks, Geoffrey Kendrick, global head of digital assets research at Standard Chartered Bank, wrote in a report on Monday. “If it were included, the implication would be more institutional buying as BTC would serve multiple purposes in investor portfolios,” Kendrick said.
The original Mag 7 index comprises Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla stocks. Kendrick’s hypothetical Mag 7B index removes Tesla — currently the smallest member in the index by market cap — and replaces it with bitcoin to test whether bitcoin should be considered a tech stock as well as a hedge against the risks and issues facing traditional finance.
According to The Block's price page, bitcoin's market cap as of publication time is $1.7 trillion, more than double Tesla's $800 billion, according to Yahoo Finance.
"We find that Mag 7B has both higher returns and lower volatility than Mag 7," Kendrick said. "This suggests that investors can view BTC as both a hedge against TradFi and as part of their tech allocation. Indeed, as BTC’s role in global investor portfolios becomes established, we think that having more than one use will bring fresh capital inflows to the asset. This is particularly true as Bitcoin investment becomes more institutionalized."
Kendrick said Mag 7B outperformed the Mag 7 index by about 5% since December 2017, starting from bitcoin’s then-all-time high just below $20,000.
“We choose this high starting point, rather than a lower one, to avoid biasing our analysis by giving BTC an unfair advantage in terms of returns,” he said. Kendrick added that Mag 7B beat Mag 7 in five of the past seven years, with average annual returns about 1% higher.