- Ethereum has surged more than 50% since 12 April, including 37% in just the last week.
- Different blockchains serve different roles and offer multiple angles and opportunities for investment and growth.
- Diversification can boost returns as different projects outperform at different times.
To the average investor, Bitcoin might seem like the safest way to get into crypto investing. It is the biggest, most well known form of cryptocurrency and has seen massive returns. However, it is not the only cryptocurrency out there, and focusing solely on buying and trading Bitcoin may mean missing out on bigger opportunities, according to Bitwise Chief Investment Officer, Matt Hougan.
In a recent memo, Hougan advised that investors should diversify their holdings across different assets within the crypto space, rather than solely relying on Bitcoin, to capture broader growth potential and to reduce overall risk. Ethereum, for example, has risen 53% in the past month – 37% of that in the last week – thanks to renewed interest from its recent major upgrade.
Related: Vitalik Buterin Calls for Simpler Ethereum, Inspired by Bitcoin’s Design
Lessons From History
If we look back to the early 2000s, Google seemed like the clear winner of the internet boom – and it was. Its stock has jumped 6,309% over the past two decades. But it hasn’t been the only winner, nor has it been the biggest.
That distinction belongs to Netflix, which nobody could have predicted then. Investors who diversified back early on, putting their money across different sectors of the internet – retail, social media, video, for example – were able to reap better rewards than those who only invested into Google.
The same logic applies to cryptocurrency.
The Case for Diversifying Crypto Investments
Hougan argues that the Blockchain is a general purpose technology, akin to the internet, that can be used in a variety of ways. Within the industry there are many different players that use the blockchain to provide value in different areas. Bitcoin is a secure, decentralised digital currency, platforms such as Solana and Ethereum support smart contracts, enabling everything from DeFi to tokenised real-world assets, and some, like Chainlink, serve as critical infrastructure within the ecosystem.
I suspect we’ll be able to do a lot of things with blockchains that we haven’t even considered today.
Matt Hougan, Chief Investment Officer of BitwiseThis means that, depending on the market conditions and broader trends, different blockchains may outperform others at different times. For investors who see value in the blockchain beyond serving as an alternative to traditional fiat currencies – it might be time to diversify.
But if you agree with me that blockchains are a general use technology—if, for instance, you’re intrigued by the idea of nearly all the world’s assets moving onchain—history suggests you’d want to own a basket of crypto assets: Bitcoin, Ethereum, Solana, Chainlink, and more.
Matt Hougan, Chief Investment Officer of BitwiseRelated: US Real Estate Agent Launches $100M Tokenised Multifamily Fund on Blockchain
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