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I Bitcoin Investor. However, in the world of cryptocurrencies, few things are more toxic than bitcoin enthusiasts persecuting others for investing in various coins.
Of course, very few people do this. This group, colloquially known as the Bitcoin Maximalists, Insanely loud and aggressive To appear as if there were many of them. it’s not.
Would you personally invest in cryptocurrencies other than Bitcoin? No, just for fun. I’m a baby boomer investor, so altcoins have never been in my long-term portfolio. But that doesn’t mean you have to spend the night blaming people online for whatever they’re doing with their money.
ethereumIt is the second largest cryptocurrency on earth.
And Ethereum is the reason I am creating this piece today. Because Twitter, the always positive kingdom where these maxis are most commonly seen, lives in celebration of Bitcoin accelerating against Ethereum. Close to this year’s lows against Bitcoin.
A few things about this. Again, I’m a Bitcoin investor, so there’s absolutely no reason to be biased here (or the other way around).
But sharing the charts for 2023 is guilty of a bit of a cousin. It’s no secret that Ethereum has completely crushed Bitcoin over the past few years, through the surge of pandemic-era bull markets in 2020 and his 2021.
Since April 2020, it is 2.53x against Bitcoin to be precise.
Ethereum, like most altcoins, tends to outperform Bitcoin in bull markets and underperform in bear markets. This is a well-known fact and intuitive. This is outside the risk spectrum and basically trades like a leveraged bet on Bitcoin. There is nothing surprising in it.
So it makes sense that Bitcoin lagged Ethereum during the 2020 and 2021 bull markets. But look at the chart below since Bitcoin’s all-time high in November 2021 (which you can use as a top marker for the cryptocurrency market). That’s a pretty solid drop of just 3.5%, a pretty negligible figure in the volatile world of Cryptoland.
The drop in ETH vs BTC in 2023 also doesn’t look that dramatic as it’s zoomed out a bit and has a wider y-axis.
As such, ETH has crushed BTC in the last bull market and more or less trailed it in the bear market as well. Either way, that’s no reason to celebrate Maxis.
Why am I holding Bitcoin instead of Ethereum? Well, I believe in Bitcoin’s asymmetric return profile and I like the way it fits into my portfolio. I am a die-hard baby boomer investor, a diversifier and a big fan of old portfolio allocation studies.
Stocks have always been the cornerstone of my portfolio, but Bitcoin offers great diversity alongside several other asset classes.
I’m not that bullish on Ethereum long term. Frankly, I still don’t fully understand it. My knowledge of Bitcoin is deeper and since entering the field in 2017, I have been intrigued by its macro implications and its uniqueness. Ethereum is more technical and for me its place in the world is less clear.
It’s not about hitting Ethereum. Like I said, even if you bought his first ETH 6 years ago, I’m not sure you fully understand it.
More importantly, past performance is no indicator of future success. Perhaps the past few months have shown this perfectly. We will delve into this in the final section.
Given the market rally across the board, it’s definitely notable that Bitcoin accelerated against its counterpart (I said almost rival!) this year. Usually this is when ETH makes a profit.
I would like to explain why, but it is not so easy. I think it sums up how unique the current market environment is. While the world fears the possibility of a looming recession, we have a troubling combination of inflation (despite softening in recent months) and high interest rates.
Bitcoin and Ethereum have never been in this kind of market environment before until last year, all risky assets exploded since the launch of Bitcoin and other than the intense bull market in the financial space. never existed. 2009 GFC.
All Bitcoin and Ethereum know is that they are low-rate, up-only markets. So when you think about why market trends are changing, you should keep that in mind (pun intended very much). The sample space here is very small and we have definitely seen a shift to a new environment since the Fed started raising rates last year. .
Another aspect of this is that this year’s recovery came after an incredibly disastrous period for the cryptocurrency market. Too much fear and PTSD can be present.
Most altcoins have little or no value and are just a byproduct of the low interest rate environment that lasted from the global financial crisis to last year. This shift by the Fed equates to a structural change, with the IT sector suffering massive layoffs and share collapse, while the T-bill has risen above 4% in the past when it became available to investors. It is certainly difficult to imagine such benefits in a few years. price.
This may have contributed to Bitcoin moving faster than altcoins, including Ethereum, compared to previous price increases. Given that FTX, Celsius, LUNA, and all the other cowboy high-profile scandals have thrown the entire space into a circus, there could be even more lasting damage to the crypto space this time around.
So just because Bitcoin underperformed against Ethereum over the past six years, it doesn’t mean it will continue to do so in the future. Who knows, this nascent industry is only a few years old.
But regardless of the speculation about the future, one thing Bitcoin’s poor performance against Ethereum over the past five years could mean is that ETH is nearing a year-to-date low against BTC before celebrating. , Bitcoin’s Maxis really needs to stop and think.
Again, thinking is not that cohort’s favorite pastime.
