Introduction: this study analyzed the risk-adjusted performance of the most popular cryptocurrencies compared to the S&P 500 index, using Jensen’s Alpha to determine whether these assets outperformed on a risk-adjusted basis during the 2019–2023 period.

Objective: the research aimed to evaluate the risk-adjusted performance of Bitcoin, Ethereum, Tether, and Binance relative to the S&P 500, assessing their ability to outperform the market using Jensen’s Alpha.

Methodology: the study employed a quantitative descriptive approach by calculating daily logarithmic returns, estimating the Beta of cryptocurrencies, applying the CAPM model for risk-adjusted returns, and utilizing Jensen’s Alpha to measure risk compensation.

Results: the findings revealed that cryptocurrencies exhibited higher volatility and extreme returns compared to the S&P 500, with significant differences in their ability to compensate for risk.

Conclusions: despite their high volatility, Ethereum and Binance successfully compensated for risk, while Bitcoin displayed less consistent performance, and Tether failed to provide adequate risk compensation. These findings underscore the importance of adaptive investment strategies in the dynamic cryptocurrency market.

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Keywords:
Cryptocurrencies,
Jensen’s Alpha,
Capital Asset Pricing Model,
systematic risk,
investment, volatility.

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