As a supplement to my recent piece at the American Institute for Economic Research, I here report all sources and calculations used.

Investigating bitcoin’s returns over the 2010s is far from easy, particularly so in the early years when bitcoin still wasn’t more than a playing toy on a mailing list. Despite growing up in the digital age, few people cared about bitcoin or its dollar-price exchanges in 2010 — meaning almost nobody took care to preserve those crucial early trades.

“Tell me about it,” a financial historian might say. “Welcome to the prime issue facing financial economists digging through the rubble of past financial markets.”

Total Return Calculations

None of the financial instruments and assets considered below pay dividends or in other ways throw off interest payments. That simplifies calculations greatly as we’re only looking at capital appreciation. For Bitcoin, that’s actually not true as owning bitcoin at the time of its several forks have entitled the owner to coins in Bitcoin Cash (BCH), Bitcoin Gold (BTG) and Bitcoin SV (BSV). Together these coins are priced at ~$360, adding a few hundred dollars to the bitcoin prices beginning in 2017 and 2018.

Throughout this comparison we’re also concerned with one-period calculations; even though the periods I discuss in the piece range up to 22 years with various trades and different prices in between, we are only using them to compare two points in time, t and t-1, where t varies across the financial investment spectrum I’m considering (roughly 1995 to 2020).

The standard formula for capital appreciation is given by

where Pt is the current price (or end-price) and Pt-1 is the historical price (or initial price). To avoid confusing myself, I tend to use the following simplified and more intuitive version of the same formula when I assess percentage returns:

When not otherwise stated, I use the end-of-year bitcoin-to-dollar price (BTCUSD) of $7,180. This is always the end-price we’re concerned with, Pt in the formulas.

For return calculations, we also need an initial price, Pt-1. I begin the piece by citing three early estimates of the the first bitcoin trades of the last decade, $0.5, $0.07 or even $0.0036:

100*(7,180/0.5 –1) = 1,435,900% return
100*(7,180/0.07 –1) = 10,257,043% return
100*(7,180/0,0036 –1) =199,444,344% return

We’re already starting to see the immense power that a lower base produces.

Lyanchev’s Numbers

I mention Jordan Lyanchev’s piece where he simultaneously claims an 8,900,000% return, a $0.07 initial dollar price and an exchange rate to USD of about $7,300 at the time of his posting. That’s not possible:

100*($7,300/0.07 –1) = 10,428,471%,
(which I rounded to “almost 10,500,000%)

Alternatively, if we run the formula in reverse, plugging in the 8,900,000% return and the (known) current price of $7,300, we get an initial bitcoin price of $0.082:

8,900,000 = (7,300/x -1) *100
89,001 = 7,300/x
x=7,300/89,001
x= 0.08202.

If we plug some other December 2019 prices into the formula, replacing $7,300 with $7,200 or $7,500, we see that Lyanchev’s initial price still doesn’t make sense. We’d have to plug in prices of below $6,675 for $0.07 to be within rounding, given a return of 8,900,000% (prices only seen for a brief twenty-four hours on Dec 17–18).

More likely, he miscalculated the statement in the CNN article (“$1 turned into $90,000") to mean “8,900,000%” when it should have been 8,999,900% — and actually, 9,002,500% given later information. But what’s a few thousand (or almost a hundred thousand) percent among friends?

This latter figure is what I referred to as “just north of nine million percent.”

Further displacing a few hundred thousand (or million?) percent return is Jamie Redman at Bitcoin.com. First his title reports 8.9 million percent. Then his text cites the 8,999,900% return implied by the supposed Bank of America report ($1 in bitcoin 2010 turned into $90,000 at the end of 2019). And finally his first price data cites a bitcoin for $0.003 in March 2010.

Quickly plugging in that initial price to our formula combined with the price at Redman’s publication (~$7,200), we get — hold on now — a return of almost two-hundred-and-forty million percent:

100*($7,200/0.003 –1) = 239,999,900%

I wonder, if the purpose of measuring bitcoin’s magnificence by its dollar-return figures, wouldn’t you wanna go with the higher ones? If you can substantiate the $0.003 price, the calculation is not wrong; why not say “240 million percent” instead of various numbers around 9 million percent?

Hajric’s Numbers

Without much details, Hajric at Bloomberg vaguely states that bitcoin returned “more than 9,000,000%,” which we have seem is roughly accurate given an initial price of a little more than $0.07.

Early price data

Uncertainty prevails regarding bitcoin’s early dollar-values. Clarification: the differences between these very small numbers are huge, which the initial calculations above show; normally, we might switch fund manager when they underperform by 1–2 percentage points — whereas here we’re throwing around millions of percent like they’re nothing.

That is, 0.082 is eleven times bigger than 0.0067, but for the final Total Return calculations that difference amounts to a roughly hundred million percent return. The numbers from low bases quickly become staggering:

A few pennies there becomes unfathomable returns — millions, tens of millions and hundreds of millions of percent— there.

That infamous pizza

The pizza story holds that in May, Laszlo Hanyecz paid 10,000 bitcoins to a third party who, in turn, ordered him two Papa John’s pizza. If priced at $25, implied BTCUSD exchange rate implied $0.0025 (25/10,000); if including the tip that Hanyecz claims were involved, that’s 0.003 (30/10,000).

Netflix’s returns

I write that NFLX closed the decade with a 4,135% return. According to Yahoo Finance, Netflix’s first price of the decade was $7.64, and its closing price on Dec 31, 2019 was $323.55. Plugging it into our formula gets us:

TR = (323.55/7.64 -1)*100 = 4,134,95%

Shifting the decade back a little bit so that I can capture NFLX’s all-time-high (intra-day trading) of $423.21 on June 21, 2018, I get almost 11,000% return based on an initial price from June 23rd, 2008 ($3.82):

TR = (423.21/3.82 -1)*100 = 10,979%

When I cherry-pick the to inflate NFLX stock return even more, I used the following dates and numbers:

ATH of $423.21 on June 21, 2018
Starting price of $0.37 on Oct 7, 2002

TR = (423.21/0.37 -1) *100 = 114,281%

which I quoted as almost 115,000% return.

Amazon’s returns

For Amazon, I use compare its IPO price of $1.50 in May 1997 to its peak close ($2012.71) on Aug 27, 2018. While intentionally measured bottom-to-peak to maximize return, I still only get little over hundred thousand percent over 21 years:

TR = (2012.71/1.5 -1)*100 = 134,080%

Gateway Industries

From $0.02 to $3 in a single day:

TR = (3/0.02 -1)*100 = 14,900%

Multiplied by 253 trading days — imagining that Gateway could keep this growth throughout the year, which of course is a ridiculous assumption — yields me 3,769,700% return (14,900*253 days).

Pier 1 Imports and Medifast

Using Pier 1 Imports journey from 11 cents on March 13, 2009 to its peak at $504 on May 13, 2013, we can construct pretty unfathomable returns:

TR = (504/0.01 -1) *100 = 458,081%

which I rounded to 460,000% return in four years.

For Medifast, the diet management company that still exist and is included in the S&P600 small cap index, I can generate 284,00% over 19 years by carefully selecting the starting date at December 1999 when the stock traded at $0.09. It closed on September 12, 2018 at $255,94:

TR = (255.94/0.09 –1) *100 = 284,278%

More well-known examples: Monster and Tesla

The shares for beverage company Monster’s predecessor (Hansen’s Natural) traded on Nasdaq for as low as 6 cents during May 2001 — and we can find share prices of $0.01 as recent as April 1996.

Its all-time-high from January 2018 (which is it currently approaching again) is of $68.91. Measured from the dot-com crash:

TR = (68.91/0.06 -1)*100 =114,750%

from the low-point in April 1996:

TR = (68.91/0.01 -1)*100 = 689,000%

For MNST to approach lifetime bitcoin-esque returns, say the 8,755,000% return cited above, Monster “only” needs to reach $877.51, which I obtained from running the formula in reverse:

8,775,000 = (x/0.01 -1) * 100
87,750 = (x/0.01–1)
87,751 = x/0.01
x=877.51

A share price for MNST of $877.51 might be outrageous and definitely unreachable in the next few years, but it’s “only” 1,276% return up from current levels:

(877.51/63.75–1)*100 = 1,276.49

Despite Tesla’s noticeable returns over the last few years, they simply cannot keep up in the total return-league for one simple reason: they IPOed at $17 dollars, and the stock price has never fallen low enough (the lowest I found was $14.98). That pretty much means that Tesla will never reach the never-never land of hundred thousand (or millions) of percent. Why?

The denominator is always going to be too big.

Tesla was an opportune contender for the 2010–2020 decadal trophy, as its IPO took place in May 2010. In the last eight months alone (on June 3rd, the stock bottomed out at $179.01) the stock has boomed some 158% after hitting a recent ATH of $462.06:

TR(eight months) = (462.06/179.01–1)*100=158.12%
TR (since IPO) = (462.06/17–1)*100 =2,618%
TR (since all-time-low) = (462.06/14.98–1)*100 =2,984.51%

Not bad, but nowhere near

Fairer Comparison: Bitcoin 2013–2015

Using a span to calculate more “fair” comparable numbers for bitcoin — where people could really access them over well-established exchange — is tedious as we’re dealing with a huge range.

The lowest price quote I find during this time period is from lala, and the highest yyy. Calculating returns based on current prices at around $7,800 yields the following percentage returns:

TR(2013-bottom) = (7,800/108.58 -1)*100 = 7,083%
TR(2015-top) = (7,800/1,154.93 -1)*100 = 575.3%

Now, we’re in definitely in the same league as the tech and biotech successes of the last decade.

I will fly you to the moon and back

Bitcoin’s returns are one-off. That is, they cannot repeat themselves.

Not even excessive claims about prices going “to the moon” will see bitcoin repeat its million-percent returns. Why? Because bitcoin no longer has a low base to start from.

Using today’s $7,885, a run to $100,000, $250,000 or a $1,000,000 amounts to returns of:

TR(100k) = (100,000/7,885 -1)*100 =1,168%
TR(250k) = (250,000/7,885 -1)*100 =3,070%
TR(1m) = (1,000,000/7,885 -1)*100 =12,582%

We may confidently state that bitcoin’s return dominance is over.

Joakim Book

Bitcoin’s Financial Returns (Full Calculations)