- Bitwise CIO makes a case for diversified crypto investment in different assets such as Bitcoin, Ethereum, Solana, and Avalanche.
- He compares it to 2004, when Google was the leading internet company, though Netflix made the most money for investors in a 21-year period.
- He equates Blockchain to the internet, saying the technology can be used for different purposes, like the internet.
Bitwise CIO Matt Hougan makes the case for diversified crypto investment, even as he hails Bitcoin as an important asset.
Hougan said that while “Bitcoin is the king of crypto assets”, citing that it is the largest cryptocurrency, while having the most liquidity and being well known.
He says Bitcoin is the only digital asset that has a shot at being an important global currency. He said the asset is similar to digital gold.
Bitwise’s CIO said that despite the important status of Bitcoin, it is wise to invest in other cryptocurrencies, making a comparison with the historical performance of internet companies.
Google and Netflix
Hougan asks the investors to put themselves in 2004.
Google was the leading internet company then, and investors would have been tempted to put money into Google as it is the “dominant player”, Hougan said.
He points out that while Google has done exceptionally well in the next 21 years, gaining over 6300%, investing in other internet companies would have served investors well, as the internet is a “general purpose technology” with uses in retail, social media, and software.
Investing in companies such as Netflix, Amazon, and Salesforce, which are leading players in other verticals of the internet, would also go on to pay huge gains for investors.
Netflix is the highest performing stock in this period with gains of over 50,000%.
Amazon and Salesforce also rack up 10,000% and 7,000% gains, respectively, leaving Google as the worst-performing stock among this group during this time.
Blockchain is similar to the Internet
Hougan compares Blockchain technology to the internet, saying the former is also a general-purpose technology with different crypto assets used for different purposes.
“You can use a blockchain to create a better form of money (Bitcoin) or to create a programmable network for transferring real-world assets” (Ethereum, Solana, Avalanche).
You can build new types of applications (DeFi, DePin) or middleware that services other blockchains (Chainlink).
You can also build traditional businesses that support the crypto economy (Coinbase, Circle, Marathon Digital)”, Hougan writes.
Power of passive investing
It is now a regular occurrence that passive funds are trumping actively managed funds.
Hougan points this trend out.
“Over the past 20 years, actively managed US equity funds have underperformed their benchmark indexes 97% of the time”, he said.
It is important to invest in the big picture rather than picking winners, Hougan writes.
He adds that after studying history, it makes sense to own a basket of cryptocurrencies such as Bitcoin, Ethereum, Solana, and Chainlink.
In the last 4 years, different crypto assets emerged as the number one performer in different years.
Hougan demonstrates this with data. He points out that it is impossible to predict cryptocurrency winners in 2030.
The case for crypto indexing in 10 sentences—and two charts.
Say it’s 2004. You know the internet is going to be big. Search is its killer app, and Google is king.
If you’d invested in Google, your money would have grown 64x since then. Smart move.
But the internet turned out… pic.twitter.com/EvIrsnAVl9
