In the world of investing, nothing exists in isolation. As investors, especially in the venture capital world, we are constantly evaluating opportunities, weighing potential returns, and assessing risks. Traditionally, the comparison has been against public markets, real estate, or fixed-income securities. But in the past decade, a new benchmark has emerged, forcing all of us to to include another brick in the wall: Bitcoin. 

Bitcoin is unique. It’s not just another asset class; it’s a foundational shift, an asset with the potential to disrupt the entire financial ecosystem. And its returns, for those who’ve held on despite the volatility (gosh, it was no easy feat), have been nothing short of remarkable. For VC investors, this is no longer something to ignore.

Historical Returns

Since its inception in 2009, Bitcoin has achieved annualized returns that venture capitalists could only dream of when investing in startups. Between 2010 and 2020, Bitcoin delivered an annualized return of around 200%. Granted, that’s a period marked by early-stage exponential growth. But even looking at the most recent 6-year period (2018-2024), Bitcoin has posted an annualized return north of 70%, outpacing top-decile VC funds performance. 

Bitcoin historical performance

And these numbers come with another factor that can’t be ignored: liquidity. Bitcoin’s market operates 24/7, making it far more accessible than any traditional asset class. When we’re looking at early-stage startups, where capital is typically locked up for 7-10 years with little to no liquidity options, Bitcoin’s liquidity is a game-changer. For an investor, the freedom to hold and sell when they choose, and potentially reinvest, is worth a significant premium.

Bitcoin’s Cycles: The Good and the Bad

Bitcoin’s cyclical nature is an undeniable factor in this equation. Over its relatively short history, Bitcoin has moved in identifiable cycles, typically catalyzed by a halving event or a broader economic shift. Each cycle brings a wave of investor enthusiasm that fuels price growth, sometimes with eye-popping numbers that turn heads across the investment world. When Bitcoin is on a bull run, it captures attention, driving investors to increasingly anchor their own investment decisions to the Bitcoin alternative.

A clear example of this cycle-driven anchoring is playing out now. After the recent U.S. elections and Bitcoin’s jump from $68,000 to $90,000 within a week, the market is abuzz with talk of a new bull cycle.

Bitcoin’s cycles are a double-edged sword. On one hand, they provide windows of opportunity to capture outsized returns. On the other, they add a layer of volatility that requires a steady hand and a keen eye for timing. Investors who can skillfully navigate these cycles have the potential to reap enormous gains, especially when they strategically enter and exit at favorable times. But for venture capitalists, these cycles also mean that any investment opportunity in a startup now faces the hurdle of competing against a cyclical asset that, at the peak of each cycle, becomes a near-irresistible alternative.

The New HODL

One of the counterarguments to Bitcoin as a benchmark is its volatility. Yes, Bitcoin’s price swings are extreme compared to traditional assets. But over time, market-neutral strategies and yield-generating options have started to emerge. By employing these, investors have been able to generate additional, consistent returns on top of simple Bitcoin appreciation.

A few BTC-based market-neutral strategies on CeFi and DeFi, such as lending, options-based and liquid restaking approaches, have shown annualized returns ranging from 5% to 20% and even 30% over the past few years (ask me for references). A passive “HODL” approach in Bitcoin isn’t just about capturing massive upside. Now it can also be about generating stable, almost bond-like returns, which are a significant factor for risk-adjusted portfolio performance.

Net historical performance of one market-neutral hedge fund in the Uniborn ecosystem

Beyond Returns

While Bitcoin’s financial returns create an undeniable benchmark, venture investing has always been about more than just maximizing returns. At its core, venture capital allows investors to back the ideas, people, and technologies they believe can change the world. For many, the goal isn’t purely about beating Bitcoin’s returns—it’s about investing where your values and expertise lie, supporting founders who are tackling the challenges that matter, and playing a role in shaping the future.

Venture capital is as much about learning and discovery as it is about capital appreciation. Each investment represents a chance to work alongside visionary founders, dive into new technologies, and get smarter through exposure to the cutting-edge of innovation. Investing in startups often aligns with the personal mission of making a tangible impact. When investors support a healthcare startup that makes diagnostics more accessible or an AI company that redefines education, they’re not just looking for financial gains; they’re part of something larger.

But this dual role means that venture investors are now under even greater pressure to ensure the financial upside can justify the mission-driven investment. Bitcoin has raised the bar, and venture capitalists have to work harder to show that the combination of potential impact, learning, and personal connection to the mission can compete with a purely financial benchmark.