Although Bitcoin and U.S. stocks are influenced by similar macroeconomic, monetary, and political factors, their investment strategies differ significantly. Stocks are driven by corporate earnings and actual cash flows, while Bitcoin has its own distinct drivers. Quantitative backtesting shows that a buy-and-hold strategy is more suitable for the S&P 500, whereas trend-following strategies perform more prominently in the Bitcoin market.
Meanwhile, the market is facing multiple uncertainties. While the latest round of U.S. corporate earnings reports has delivered a batch of companies exceeding expectations, rising oil prices back to $100 per barrel, the approaching U.S. midterm elections on November 3, and funding pressures on AI infrastructure are offsetting some of these positive factors. Current prediction markets estimate the probability of a Democratic sweep at approximately 65%, and their potential policy inclination to slow AI data center development is putting pressure on the revenue and funding prospects of related companies.
On monetary policy, several Fed policymakers have ruled out an interest rate hike on October 28, with markets now betting on another hike in December. As oil prices exert less upward pressure on inflation, December may mark the final rate increase, followed by an extended pause. The yield on the 10-year U.S. Treasury bond may also have peaked temporarily and is expected to decline below 5.0%.
S&P 500 10-year return: 392%
Historical data shows that over the past 40 years, the S&P 500 has averaged a 2.9% return from April 30 to November 1, and a 7.2% return from November 1 to April 30 of the following year, with positive returns in 76% of those years. This indicates that November is typically a key period marking the start of the seasonal strength phase for U.S. equities.
The midterm elections could also serve as a market turning point. Historically, U.S. equities often underperform in the months leading up to the midterm elections, but typically deliver stronger risk-adjusted returns after the election, as political uncertainty declines. Although current risks such as inflation, AI-related financing, and potential geopolitical actions by the U.S. and Israel against Iran remain, short-term pullbacks may occur, seasonal factors continue to provide support for U.S. equities.
More importantly, consider the quantitative backtest results: over the past 10 years, the buy-and-hold strategy on the S&P 500 generated a cumulative return of 392%, significantly outperforming the trend-following strategy’s 166%. On an annualized basis, the buy-and-hold strategy achieved a return of 16.1%, while the strategy that only holds positions during bullish trends returned 9.6%.
This difference reflects the long-term structural advantages of the U.S. stock market. The S&P 500 regularly removes underperforming components and adds high-quality companies that meet its criteria, allowing the index to continuously benefit from corporate earnings growth. Historically, buy-and-hold strategies have outperformed attempts to frequently time market turning points.
Why does long-term Bitcoin holding underperform?
Unlike the S&P 500, Bitcoin, despite generating substantial returns over the past decade, has seen diminishing returns from a buy-and-hold strategy over the past five years. Compared to simple long-term holding, trend-following strategies have historically outperformed by maintaining positions during bullish trends and switching to cash during bearish trends.
Quantitative backtests over the past 10 years show that a buy-and-hold strategy for Bitcoin yielded an annualized return of 62.8%, while a trend-following strategy that only holds positions during bullish trends achieved 68.4%, outperforming the long-term hold approach. In contrast, a strategy combining trend following with long-short trading delivered an annualized return of 40.8%, indicating that more complex trading methods do not necessarily generate higher returns.
Over the past five years, the difference is even more pronounced: the trend-following model achieved an annualized return of 25%, compared to just 8% for buy-and-hold. This highlights that successful Bitcoin investing isn’t just about long-term bullishness—it also requires identifying shifts in market trends and adjusting positions promptly when downtrends emerge.
Specifically, when Bitcoin enters a bearish trend, the strategy shifts to holding cash; once a bullish trend is reconfirmed, long positions are reinstated. Currently, Bitcoin remains in an uptrend, but potential risks to monitor include AI-related funding pressures, the risk of network attacks impacting the crypto market, and macroeconomic uncertainty.
Overall, while Bitcoin and the S&P 500 are influenced by similar macroeconomic factors, historical backtesting reveals two distinct winning strategies. The S&P 500 is better suited for a buy-and-hold approach, particularly during its seasonal strength period from November through April; Bitcoin, on the other hand, relies more on trend following—maintaining long positions during bullish trends and locking in profits while waiting for the next bullish signal when the trend turns bearish.
As the U.S. midterm elections approach and expectations for a December rate hike become clearer, the market may still experience short-term volatility. However, given that government spending continues to outpace revenue and debt is growing faster than economic output, holding risk assets remains important. For U.S. equities, the focus should be on avoiding disruption from short-term macro noise; for Bitcoin, it’s essential to continuously monitor trend signals. As long as the current uptrend remains intact, maintain a bullish positioning strategy while remaining alert to risks that could trigger a trend reversal.
Some of the above insights are from BIT on Target; contact us to obtain the full BIT on Target report.
Disclaimer: The market carries risks; investments should be made with caution. This content does not constitute investment advice. Trading digital assets may involve significant risk and volatility. Investment decisions should be made only after carefully considering your personal circumstances and consulting with a financial professional. BIT is not liable for any investment decisions made based on the information provided in this content.