Data from the past few years points out that despite certain instances since 2015 where altcoins outshined BTC, an investment approach focused solely on Bitcoin has generally performed impressively.

Altcoins, characterized by their innovative features, promising tech advancements, and potential high-yield investment opportunities, often post significant gains outpacing Bitcoin BTC $30,071, a phase commonly referred to as the altcoin season. Nevertheless, an analysis by K33 Research indicates that a ‘Bitcoin only’ investment has, in the long run, proven to be a more lucrative strategy than investing in an altcoin portfolio.

Long-Term Altcoin Portfolio Trails Bitcoin’s Performance

Three bull and bear market cycles, starting in 2013 and the latest in 2021, have been witnessed by Bitcoin. In each cycle, Bitcoin’s price surged drastically within a few months of surpassing the previous cycle’s peak.

The altcoin market was in its infancy in 2013 when BTC peaked around $1,175 before descending for two years. Bitcoin’s access points were limited, and exchanges converting them to altcoins were scarce.

However, the altcoin market began to flourish towards the end of 2015 with the advent of various altcoins, including Ethereum. Bitcoin’s price break above its 2013 peak in April 2017 triggered a bull run in altcoins. Altcoins, primarily driven by Ethereum’s ICO boom and Ripple’s XRP retail investment hype, significantly outperformed Bitcoin in the second half of 2017.

Still, post-bull market, altcoins suffered more considerable losses compared to Bitcoin. This suggests altcoins largely surged due to purchases made during Bitcoin bull markets in hopes of securing higher returns.

Bitcoin, post-recovering from late 2018 lows of $3,250, found support around $6,500 during the bear market of 2018-2019. However, altcoins mostly stayed low during this period, only reversing their trend after Bitcoin broke its previous peak of $20,000.

K33 Research compared the performance of a $1 investment each in 1,009 altcoins since 2015 (as they entered CoinMarketCap’s top 100 by market capitalization) versus the same amount invested in Bitcoin simultaneously. The Bitcoin-only strategy resulted in approximately $50,000 today compared to the altcoin portfolio’s roughly $7,000.

Trends and Shifts in Altcoin Market

Altcoins are often driven by market narratives, which can evolve and cause certain tokens to lose popularity. For instance, privacy-focused tokens, once highly sought-after in 2017, dropped out of the top 100 due to regulatory scrutiny.

Similarly, several DeFi tokens, such as Compound COMP $29.70 and Thorchain RUNE $0.93, once dominant in 2020, have since declined due to a decrease in DeFi usage and demand for non-yielding governance tokens.

Altcoins’ volatility, coupled with regulatory uncertainties, adds another layer of unpredictability to their market performance. Different altcoins experience their peak seasons at varying times, and these seasons’ duration can vary greatly, requiring impeccable timing on the part of investors to turn a profit.

The study found that, since 2015, over two-thirds of the 1,009 altcoin projects that entered the top 100 by market capitalization became inactive. Only around 1.5% outperformed Bitcoin’s 50X returns, with only 9.11% yielding positive returns.

The analysis indicated that altcoin investments turned profitable only twice since 2015—once in 2017 due to the exceptional performance of ether ETH $1,880 and XRP XRP $0.50, and again briefly in 2021 due to the Dogecoin DOGE $0.07 and Shiba Inu SHIB $0.000008 frenzy.

However, while Bitcoin was reclaiming the $60,000 level from March 2023 and setting new all-time highs at $69,000 during the second half of 2021, most altcoins, except ETH, registered lackluster gains.

Indicators of Bitcoin’s Dominance and Implication for Altcoins

Besides Bitcoin’s all-time high, another strong indicator of long-term trend reversals in altcoins is breakouts in Bitcoin’s dominance levels.

Previous altcoin seasons 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 peak in the total market capitalization of altcoins.

A crucial historical resistance point was marked by a breakout in Bitcoin’s dominance above the 50% level on June 19, 2023, primarily due to BlackRock’s Bitcoin ETF filing. This could potentially pave the way for further altcoin losses.

The previous bear market between 2018 and 2020 saw Bitcoin’s dominance rise to over 70% as Bitcoin’s performance remained relatively robust with its price maintaining above the 2018 lows of around $3,250. This period, according to K33 Research, recorded notably poor altcoin performances, hitting new lows toward the end.

The K33 Research report suggests that while altcoin portfolios can offer additional profits on Bitcoin, this typically necessitates either “timing the market or picking the altcoin winners.” Anders Helseth, VP of research at K33 Research, suggested that the Dollar Cost Averaging (DCA) strategy into Bitcoin can be an effective investment approach for crypto investors. He referred to the Bitcoin DCA strategy as a “sensible, quite safe, and simple crypto investment strategy.”

Despite the potential for high returns, investing in altcoins requires careful consideration and strategy. The volatility and unpredictability of altcoin markets mean that profits are not guaranteed and losses can be substantial.

Altcoins’ performance can be impacted by a range of factors, including market sentiment, technological advancements, and regulatory developments. It’s essential for investors to stay informed about these factors and adjust their investment strategies accordingly.

While Bitcoin’s long-term performance has generally outperformed altcoins, it’s important to note that past performance is not a guarantee of future results. Each investment comes with its own risks and potential rewards, and it’s crucial for investors to thoroughly research and consider these factors before making investment decisions.