Usually in bull markets, the “high beta”, riskier securities outperform. This is what we saw over the last 7 months. Bitcoin rallied impressively, but was dramatically outperformed by the more volatile and more speculative Ethereum, which was itself outperformed by some of the even more speculative and smaller cryptocurrencies. The tail end of such rallies are often “junk rallies”, with the strongest gains accruing to the fundamentally least attractive securities.
But this pattern doesn’t always hold true, and I think we’re about to see the exception. I think we’re likely to see a strong cryptocurrency rally that’s led by a handful of high market cap cryptocurrencies. For a historical analogue, consider the “Nifty Fifty” in the 1960s and 1970s. Institutional investors became enamored with about 50 growth stocks that came to be viewed as “single decision” stocks. People felt they could buy those equities with confidence they were both safe and high performing assets. That belief becomes self-reinforcing for a time – as money flows in and people buy every dip, the securities do indeed look both very stable and very lucrative.
Which securities are the cryptocurrency “Nifty Fifty?” Consider where institutional and retail money can flow most easily. Look at the cryptocurrencies offered by Coinbase, Gemini, and the investment trusts offered by Grayscale, and the equivalent companies in Asia. Look at the most liquid, most stable, and oldest cryptocurrencies, the ones that would be most appetizing to, say, a Family Office that wants to broadly invest in cryptocurrency in as passive a form as possible. What cryptocurrencies can most easily be thought of as “established”?
Ari Paul
The Cryptocurrency Investor 
It does make sense, but nothing mentioned as to *why* you think it’s a good possibility. Share your thought process, or else there isn’t much value to this post.
LikeLike
Indeed, I didn’t clearly provide a “why.” It comes down to who the new investor is: https://thecryptocurrencyinvestor.com/2017/07/14/the-wall-street-moment/
as well as retail. Institutional money and retail money both flow to the places I described most readily.
LikeLike
Great thinking as always Ari. I think the thought process is tied to the post about the evolution of who cryptocurrency investors are (next phase is Wall Street adoption). I think this makes sense. Personally, I focus on the top 20 coins by market cap and pick the ones I think are best from that set. For an advisor/fiduciary, it would be hard to defend losing money on a lower market cap coin (especially if it turns out to be a scam and/or mismanaged). Diversification is important in cryptocurrency just as it is in any asset class.
LikeLiked by 1 person
Due to the low trading costs and volatility, how often should you be rebalancing your basket of crypto currencies. Monthly, quarterly, or Yearly. I fully agree distribution and liquidity of the currencies are the most important to picking the currencies. High market cap and low volume currencies scare me due to the ease of potentially being manipulated. One thing not mentioned here is understanding the underlying technology and whether it can gain traction before running out of money. There are a lot of concepts out there that have no chance being around in 10 years and when people realize that, those will go to 0.
LikeLike
I’m interested in this as well.
“Due to the low trading costs and volatility, how often should you be rebalancing your basket of crypto currencies. Monthly, quarterly, or Yearly.”
LikeLike
I think this will likely play out but will be something like The Great Eight or The Formidable Four. The access factor you mentioned is part of it – another factor is that many of the highest cap coins at this point are platforms that underly the whole ecosystem of other tokens and benefit from the growth of all the tokens built on them. For instance, the value of Ethereum benefits from the use of tokens built on it like Augur and Golem. So coins at the protocol/platform layer are likely to thrive and more often than not the more established platforms will beat out the new platforms on the block like EOS, since they essentially have a network effect i.e., they have greater utility due to all the coins built on them and have attracted a greater mindshare and talent pool of developers. Investing in a platform like Ethereum is arguably the equivalent of investing in TCP/IP at the dawn of the internet era – if it had been an investable asset. The one major caveat here is security. The prominent platforms will be targeted the most and may face existential threats.
LikeLike
Hi Ari
If you were a hypothetical long term holder–someone with no info/analytical advantage but yearns to risk 3% of their money– how would you allocate portfolio % of this basket: btc/eth/Ltc or other coins?
Thanks , jeff
LikeLike
I would think most family offices wouldn’t try this themselves and would instead be willing to pay a competent technology-focused hedge fund to do the research necessary unless they just wanted to buy BTC and ETH.
Along those lines, I’d imagine many of the best hedge funds would likely avoid BTC and ETH and focus on cryptocurrencies that are up and coming in order to justify their fees and achieve superior returns.
LikeLike
Crypto is a well-published name in a real time investment along with blockchain that it is achieving great heights to overcome the real market, checkout this article to know more- https://goo.gl/fjQHWN
LikeLike
I love read your blog I almost visit every week and read your informative articles from your website. I’m interested in BTC and other crypto I have invested some amount In them.
LikeLike
1.The Fastest and Easiest Crypto Exchange Platform With Connections To Over 35 Global Market Exchanges
Buying bitcoin just got easier with the fastest and the first time arbitrage cryptocurrency exchange platform – Bitcoin Mart.
With so many cryptocurrency exchange companies out there, it would be pretty difficult to pick one that suits all your crypto trading requirements and provides you with fast and easy exchange solutions for all your cryptocurrency trading.
Bitcoin mart makes that decision easy for you by not only providing you with fast exchange solutions, but also giving you the best exchange rates and access to other services that would make it easy for you to buy bitcoin, buy ethereum tokens and also exchange cryptocurrency for fiat and other currencies at the cheapest prices ever.
We are connected to over 35 Global coin market and we provide you with regular updates on bitcoin and ethereum prices to reflect the current value of the coin and the future predicted value and help you speculate intelligently to get the best out of your investments.
2. What’s in it for you?
Convenience Of transactions
At Bitcoin Mart, because we realize that ease of transacting business with our customer’s plays a major role in client satisfaction, our platforms allow for several different kinds of payments in exchange for cryptocurrency. We accept any form of currency, credit cards, digital currency, cryptocurrency and even electronic online payments in exchange for cryptocurrency. We can even send the
Cryptocurrency straight to your bitcoin wallet giving you more convenience when you trade with us.
Secure Platform for Transactions
We provide our clients with secure bitcoin wallets for storing their currency and making transactions and our exchange platform implements the best security technology utilizing offline cold storage wallets, two factor authentication and encrypted databases. Our technology ensures that our database is fully protected from cybercrime by storing passwords as hashes, giving you a platform to trade bitcoin safely.
We Get The Best Exchange Rates For You.
We help you speculate like a pro. By use of an Arbitrage system which compares prices from over 19 sources, we remove the headache of speculating on bitcoin prices from you and get you the lowest rates for buying cryptocurrency thereby helping you make more profit from your cryptocurrency investments.
We Add Value To Your Transactions:
We help you create and manage your portfolio of transactions. That way you have access to all your cryptocurrency transactions in one place.
At Bitcoin Mart, all our clients’ digital assets are insured and in the unlikely event of theft or a breach in our security, our insurance policy would pay to our customers the equivalent of what was lost in assets. This insurance policy however only covers for losses due to compromise of Bitcoin Mart vault or from the fault of any of the company’s staff and does not include breach in individual customer accounts. It is your duty as our Client to ensure that your account is secure by using strong passwords and ensuring that all your login details are kept private.
LikeLike