Bitcoin has been a rather good investment. Everyone knows that. But how does it compare to alternative cryptos? Some, like Ether and Doge, have outperformed Bitcoin. But many more have tanked. Do you remember coins like Peercoin, BitShares, the DAO?
Let’s compare these two strategies:
- “BTC” – As a true Bitcoin Maximalist, you hold BTC only!
- “TOP TEN” – Buy the top 10 coins from Coinmarketcap, 10% each.
I’ll test with seven different holding periods; seven years, then six, five, four, three, two and one year.
2014 – 2021
Buy 2014-05-25 (the last day of May 2014 in Coinmarketcap’s archive)
Sell 2021-05-30 (I used the live prices when writing this article)
The top ten coins at the time were Bitcoin (BTC), Litecoin (LTC), Dash (DASH), Peercoin (PPC), Nxt (NXT), Dogecoin (DOGE), Ripple (XRP), Namecoin (NMC), Omni (OMNI) and BlackCoin (BLK).
The return column is in times not percent. The percentage numbers are so large they would be difficult to read. Welcome to crypto!
I’ve adjusted Bitcoin by adding Bitcoin Cash and Bitcoin SV to its 2021 price. This only amounts to some 2% though. But to be correct, if you have held Bitcoin since 2014, you also hold the same number of forked coins.
What strikes me is that five of these coins have – if not died – been put on life support. Peercoin was actually an innovative proof-of-stake coin with focus on low energy usage. One of today’s hottest topics! They were ahead of their time. Nxt and Omni are pre-Ethereum smart contract platforms. BlackCoin is a privacy coin, now in Monero’s shadow.
Ripple is a questionable coin. Most coins are held by Ripple Labs, thus with its low free flow the market cap is artificially high. It uses permissioned consensus without a blockchain. I never liked Ripple but the answer is very clear – it has yielded a 240x return over seven years – the marked has rewarded their hybrid approach even more than Bitcoin!
This leads me to the beauty of mechanical system like this. If you trust coinmarketcap’s authority, you pick their coins regardless of your own opinions.
Which would also have taken you to the moon with Doge!
The two strategies compared
- 63.8 times return (81% per year) for BTC
- 104.8x (94% pa) for TOP TEN
The winner for 2014-2021 is TOP TEN thanks to Dogecoin and Ripple.
2015 – 2021
New to the list this year are BitShares, Stellar, Banx and MaidSafeCoin. Out are Peercoin, Namcoin, Omni and BlackCoin.
Bitcoin outperformed all except Doge. But is Doge’s astronomical ride enough to take the altcoins to the lead?
- 158.5x (137% pa) for BTC
- 256.7x (152% pa) for TOP TEN
Once again the TOP TEN strategy wins! That’s a 2-0 lead.
2016 – 2021
Ethereum, the DAO, Lisk and Steem are this year’s newcomers. BitShares, Stellar, Nxt and Banx are out.
Holders of Ethereum also received Ethereum Classic and I have accounted for this in the 2021 price.
The DAO got rekd and we haven’t seen much steam from Steem.
Three of the coins, Ethereum, Ripple and Dogecoin have outperformed Bitcoin. With Doge in orbit, the result is not surprising:
- 69.3x (133% pa) for BTC
- 177.8x (182% pa) for TOP TEN
TOP TEN is now in the lead 3-0. One more and they win the best of seven playoff.
2017 – 2021
Half the list changed this year. The newcomers are NEM, Ethereum Classic, Monero, Bytecoin and Golem. Those out are the DAO, Lisk, MaidSafe, Dogecoin and Steem.
The big news is that Doge is out of top ten! If you had bought your top altcoins in May 2017, could you possible have outperformed the Bitcoin maximalist?
The altcoins this year are a sad bunch! Only Ether did okay but not as well as Bitcoin.
That said, crypto land is spoiled. Even a 1.7x (70%) return for Dash over four years is at par with S&P 500’s 74% over the same period.
- 16.9x (103% pa) for BTC
- 5.7x (54% pa) for TOP TEN
The first win for BTC and the score is now 3-1!
2018 – 2021
Even more changes this year. Stellar has been out since 2015 but makes a comeback this year. Bitcoin Cash, EOS, Cardano, TRON and IOTA are the newcomers. Out are NEM, Ethereum Classic, Dash, Monero, Bytecoin and Golem.
Doge is still missing.
Does this rookie team of altcoins stand a chance against good old Bitcoin?
Only Cardano outperformed Bitcoin. It looks pretty clear that Bitcoin wins. Let’s look at the final calculations.
- 4.8x (69% pa) for BTC
- 2.5 (35% pa) for TOP TEN
TOP TEN’s lead has shrunk to 3-2.
2019 – 2021
The list has stabilized. The only newcomer is Binance Coin. IOTA is out.
At first glance it’s not easy to see who the winner is. Bitcoin has done decent with a 4x return over two years. Only three coins have done better. Ether and Binance at 9x each and Cardano with an impressive 18.8x return.
- 4.1x (103% pa) for BTC
- 5.3x (131% pa) for TOP TEN
With a lead of 4-2 and only one year left, it’s clear that TOP TEN wins overall.
2020 – 2021
The newcomers this year are Bitcoin SV and Tezos. Stellar and TRON have left the list.
The last year Ethereum, Binance Coin and Cardano have outshined Bitcoin.
- 3.8x (277% pa) for BTC
- 7.0x (603% pa) for TOP TEN
An overall victory of 5-2 for the altcoins!
I did this as a fun test but it’s perhaps not the most conclusive. I used seven different buy dates but only sell date. This makes all seven outcomes dependent on a single event. Indeed, Dogecoin, changed the conclusions for 2014, 2015 and 2016. If Doge had “only” made a 100x return Bitcoin would have won all those years.
One insight I did gain is that you can find jewels in the top 10. Not only Dogecoin, several others have gained more than 100x
- Ripple from 2014, 2015 or 2016 to 2021
- Litecoin from 2015 to 2021
- Stellar fom 2015 to 2021
- Ethereum from 2016 to 2021
Over the last year Binance Coin and Cardano’s ADA have all done pretty well at around 20x.
These gains have more than offset the many losers also present in the top ten.
In terms of risk, is it safer to be all in Bitcoin? Conventional wisdom is to diversify. Crypto may be different thought. A Bitcoin Maximalist will argue that the network effect is everything and eventually BTC will take the entire market. I believe this may hold true for crypto currencies as Litecoin and Bitcoin Cash are losing terrain, and Peercoin is near dead. But as Ethreum has proved, crypto is much more; decentralized finance. That’s the niche they have grabbed.
On top of this, the network effect may not even work. As both Bitcoin and Ethereum suffer from scaling issues and high fees, there may well be room for others.
These are all ramblings, but the numbers show that the top 10 have indeed been good at averaging out gains and losses. In an overall risk minimizing strategy I would suggest 30% in Bitcoin, 20% in Ether and the rest divided among the other top cryptos.