‘Bitcoin only’ buy-and-hold investment strategy outperforms altcoins over the long term — Analysis shows

Altcoins offer diverse, innovative features, promising technological advancements, and potentially lucrative investment opportunities.

Many-a-time specific altcoins post handsome gains that surpass Bitcoin (BTC), popularly known as altcoin season. However, K33 Research analysis shows over the long-term, ‘Bitcoin only’ has been a better investment strategy than an altcoin portfolio.

Altcoin portfolio underperformed Bitcoin over the long run

Bitcoin has had three consecutive bull and bear market cycles, starting in 2013 with the latest one coming in 2021. In each cycle, Bitcoin’s price rose parabolically in a very short span, usually a few months, after surpassing the peak of its previous cycle.

In 2013, BTC peaked around $1,175 and after that followed a downtrend for two years. At the time, the altcoin market was in its nascent stage. The fiat onramps to Bitcoin were limited and exchanges to convert them to altcoins were rare.

However, by the end of 2015, a number of altcoins, including the invention of Ethereum had occurred. A few exchanges had also propped up that supported conversion of Bitcoin to other cryptocurrencies, paving the way for an altcoin market.

It was not until April 2017 when Bitcoin’s price broke above the 2013 top, that a bullish run in altcoins took place. During the second half of 2017, the ICO boom on Ethereum and retail investment hype around Ripple’s XRP led the altcoin season as many tokens outperformed Bitcoin until January 2018.

Nevertheless, in the aftermath of the bull market, altcoins suffered relatively larger losses than Bitcoin. It suggested that altcoins surged primarily as users bought them during Bitcoin bull markets with the hope of capturing higher returns.

The chart for Bitcoin and altcoin market capitalization shows that during the bear market of 2018-2019, Bitcoin found support around $6,500 after recovering from lows of $3,250 in late 2018. However, altcoins continued to hover around the lows for most of the duration of the bear market and only reversed their trend after Bitcoin broke above its previous peak of $20,000.

Bitcoin price (top) and altcoin market capitalization (bottom). Source: TradingView

K33 Research calculated the performance of $1 investment each in 1,009 altcoins since 2015 as they entered the top 100 ranks by market capitalization on CoinMarketCap versus the same amount invested in Bitcoin simultaneously.

The altcoin portfolio would be worth approximately $7,000 today compared to $50,000 from the Bitcoin-only strategy.

Altcoin vs Bitcoin performance since 2015. Source: K33 Research

Altcoins are usually narrative driven and many narratives die with the evolution of the market. For instance, privacy-based tokens were quite popular in 2017, however, due to regulatory scrutiny, these have dropped out of the top 100 rank by market capitalization.

Similarly, many DeFi tokens like Compound (COMP) and Thorchain (RUNE) that populated the market in 2020 have dropped out of the top cryptocurrency list due to decline in DeFi usage and along with it the demand of holding non-yielding governance tokens.

Altcoins are also subject to volatility and unpredictable shifts with regulatory uncertainty hovering over most tokens. Different altcoins may experience their individual seasons at different times, and the duration of an altcoin season can vary significantly, requiring perfect timing on investor’s part to churn a profit.

K33 analysts found that since 2015 over two-thirds of the 1,009 altcoin projects that managed to creep into the top 100 rank by market capitalization have become inactive. Only 9.11% of these altcoins yielded positive returns, with only around 1.5% outpacing Bitcoin’s 50X returns.

Performance of 1,009 altcoins that entered the top 100 market capitalization rank since 2015. Source: K33 Research

The reported added that altcoins investments were profitable only two times since 2015—in 2017, when the altcoin strategy gained a significant edge due to the outperformance of ether (ETH) and XRP (XRP) and in 2021 when the altcoin portfolio briefly approached Bitcoin's value during the Dogecoin (DOGE) and Shiba Inu (SHIB) hype.

Notably, during the second half of 2021 when Bitcoin regained the $60,000 level from March 2023 to make new all-time highs at $69,000, altcoins, except ETH, posted relatively dull gains.

Positive breakout in Bitcoin’s dominance

Besides a breakout in Bitcoin’s all-time high, another potent indicator that helps identify long term trend reversals in altcoins are breakouts in Bitcoin’s dominance levels from cricual levels.

Altcoin seasons in the previous two cycles were marked by a breakdown in Bitcoin’s dominance below 60%. After the bullish trend reversal, the bottom in Bitcoin’s dominance also coincided with the top in the total market capitalization of altcoins.

The total market capitalization of crypto excluding Bitcoin (top) and BTC dominance over the crypto market (below). Source: TradingView

If history repeats itself, Bitcoin’s dominance could rise further while altcoin performance remains subdued.

A breakout in Bitcoin’s dominance above the 50% level on June 19, 2023, thanks to BlackRock's Bitcoin ETF filling, has opened room for further altcoin losses as it marked a crucial historic resistance point.

In the latter half of the previous bear market that ran between 2018 and 2020, Bitcoin's dominance increased to over 70%. On the other hand, Bitcoin's performance was relatively better as its price held above the 2018 lows of around $3,250. K33 Research also shows that this period marked significantly poor altcoin performances, making new lows toward the end.

Related: Crypto industry ‘destined’ to be BTC-focused due to regulators: Michael Saylor

K33 Research analysts added in the report that altcoin portfolios have shown the potential for extra profits on Bitcoin, however, that requires “timing the market or picking the altcoin winners.” Anders Helseth, VP of research at K33 Research, told Cointelegraph regarding DCA that,

“You can create higher returns by trading market sentiment more aggressively, but it requires a lot of attention, and it is obviously more risky.”

Given that Bitcoin outperformed altcoins over the long run, an effective investment strategy for crypto investors can be dollar cost averaging (DCA) into Bitcoin.

DCA means regularly investing a fixed amount of money into a particular asset over a specific period, regardless of the investment's price, to average the principal amount and remove the need to time the markets. Helseth of K33 Research commented on Bitcoin DCA strategy that “it's a sensible, quite safe, and simple crypto investment strategy.”

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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