3 Reasons Bitcoiners Should Also Buy Ethereum, According To Bitwise

With Ethereum ETFs on the horizon in the US, should existing Bitcoin ETF holders split their cryptocurrency holdings into ETH?

in Twitter topic On Thursday, Matt Hogan, CTO at Bitwise, gave three reasons why this might be a good idea.

Why should Bitcoin holders buy Ethereum?

The first, Hogan wrote, is for diversification. Since the future of cryptocurrencies is difficult to predict, holding a stake in both major assets can provide comfort to investors in the event that one asset falls out of favor, or is eaten up by the other over time.

“Ask any dot-com boom investor who bought AOL Pets.com,” Hogan said He said. “They got the overall bet right—the internet is going to be big!—but the details are wrong. Sad!”

As of the time of writing, Bitcoin's market capitalization represents 55% of the entire cryptocurrency market, according to TradingView. Ethereum represents 18.6%.

While ETH's performance has been generally consistent against Bitcoin over the past five years, its dominance over the top cryptocurrencies has slowly declined since the September 2022 merger. However, the ETH/BTC ratio received a modest boost when the US Spot ETF was approved to take delivery Last month.

Second, Hogan said that the fundamentally different nature of Bitcoin and Ethereum makes it difficult to choose between them. While Bitcoin is optimized to be “better money,” Ethereum is designed for “programmable money” that enables blockchain applications like stablecoins and DeFi.

“Adding some ETH to a majority position in BTC gives you broader exposure to all the things public blockchains can do,” he said.

BTC and ETH perform best together

Finally, Hogan said the historical performance of both assets shows they perform best when balanced together in a portfolio.

For example, a “traditional” 60/40 portfolio with a 5% crypto allocation had a higher cumulative return over the past four years when it was weighted 70/30 between a BTC and ETH allocation (56.32%) than when it was only allocated For BTC (54.49%). ).

Interestingly, it had a lower “maximum withdrawal limit” than a Bitcoin-only wallet during that time, declining only 25.19% at its peak compared to 25.35%.

However, Hogan said there is still a major reason why investors want to remain solely in Bitcoin.

“Bitcoin is very likely to be the dominant new form of 'money' to emerge in cryptocurrencies,” Hogan said, noting its massive current leadership and community orientation towards this market.

“Money is a huge market. There is a lot of room for BTC to run if it succeeds,” he said.