Standard Chartered swaps Tesla for bitcoin in ‘Mag 7’ test, finds higher returns and lower volatility

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 is "almost always" more correlated to the Nasdaq than 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."

Mag 7B vs. Mag 7

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.

According to Kendrick, the performance boost from adding bitcoin wasn’t just about returns. Mag 7B also showed lower volatility than Mag 7 in every single year of the analysis, he said, adding that on average, it was nearly 2% less volatile. When combined with stronger returns, this gave Mag 7B a higher information ratio: 1.13 versus 1.04.

The information ratio measures the excess return an asset delivers relative to its risk—the higher the ratio, the more efficiently it generates returns.

“This suggests to us that Mag 7 portfolios would have benefited from including BTC and removing TSLA over the past seven years,” he said.

Kendrick added that bitcoin’s inclusion would be even more beneficial this year. Since the launch of spot bitcoin ETFs in early 2024, trading bitcoin has become as seamless and cost-effective as trading other Mag 7 stocks, he said.

Kendrick also noted a shift in how bitcoin trades. Since President Donald Trump’s January 2025 inauguration, bitcoin’s volatility-adjusted behavior has looked similar to Nvidia’s — while Tesla now trades more like ether, he said.

“We think that BTC should be seen as serving multiple purposes in investor portfolios; this would open up the possibility of even more institutional buying,” said Kendrick.

As for this week’s outlook, Kendrick said it looks positive for bitcoin and crypto as markets hope for a milder U.S. tariff announcement on April 2. With the Nasdaq coming off its worst quarter since mid-2022, he expects some portfolio rebalancing that could boost buying. “Higher Nasdaq will equal higher Bitcoin. $90,000 in focus now,” Kendrick said.

Bitcoin is currently trading at around $88,300, according to The Block's Bitcoin price page.