As Bitcoin continues to dominate the crypto market with a 55% share, the question arises: should Bitcoin holders consider adding Ethereum to their portfolio? According to Bitwise CIO Matt Hougan, there are three compelling reasons to do so.
Firstly, diversification is key. Just like investors in the dot-com boom who bet on AOL or Pets.com, holding both Bitcoin and Ethereum can provide relief if one asset falls out of favor. With Ethereum’s market cap comprising 18.6% of the crypto market, it offers a different investment opportunity compared to Bitcoin.
Secondly, the fundamental differences between Bitcoin and Ethereum make them complementary assets. While Bitcoin is focused on being “better money,” Ethereum enables programmable money for blockchain applications like DeFi. By adding ETH to a BTC-heavy portfolio, investors can gain exposure to the full range of possibilities that public blockchains offer.
Lastly, historical performance data shows that a balanced portfolio of both Bitcoin and Ethereum outperforms a BTC-only portfolio. A 70/30 allocation between BTC and ETH yielded a higher cumulative return over the past four years compared to a BTC-only allocation. Additionally, the balanced portfolio had a lower maximum drawdown, indicating less volatility compared to a BTC-only portfolio.
However, despite these reasons, some investors may still prefer to stick with Bitcoin only. With its massive lead in the market and strong community support, Bitcoin is seen as the dominant form of “money” in the crypto space. As Hougan points out, there is plenty of room for Bitcoin to grow and succeed in the evolving financial landscape.
In conclusion, adding Ethereum to a Bitcoin portfolio can offer diversification, exposure to different blockchain use cases, and potentially higher returns. While Bitcoin remains a strong contender in the crypto market, considering Ethereum as part of a balanced portfolio strategy could be a wise move for investors looking to maximize their crypto holdings.
For those interested in taking advantage of special offers in the crypto space, platforms like Binance and BYDFi Exchange are currently offering exclusive rewards for new users. These offers can provide additional incentives for investors looking to expand their crypto portfolios and explore new opportunities in the market.