Over the past 12 months, year-to-date, bitcoin has fallen behind Ripple,
Litecoin, and Ethereum in terms of price growth.
Bitcoin’s Year-to-Date Return
Bitcoin still has recorded a massive price increase of 14-fold,
from $1,000 to $16,000.
Merely a $1,000 dollar investment in Ripple in the beginning of 2017
would have led to a profit of $162,500, while an investment in bitcoin
would have led to $16,000.
The top three cryptocurrencies in the market bitcoin, Ethereum, and Bitcoin Cash
have less potential to increase by large margins in comparison to cryptocurrencies
with market valuations of less than $10 billion.
Unless the entire cryptocurrency market surges exponentially and the valuation
of the market grows to many trillions of dollars by the end of 2018, in the short-term,
it is unlikely that leading cryptocurrencies including bitcoin, Ethereum, and Bitcoin Cash
will record an astronomical surge in value, by more than 100-fold.
Billionaire hedge fund investor Mike Novogratz, Fundstrat’s Tom Lee, and highly respected
financial analyst Max Keiser have established an interim price target of bitcoin at around $50,000,
which would place the market valuation of bitcoin at $1 billion.
Solely in terms of price growth, a $50,000 target would be a 3.5-fold increase in
value over a 12-month period.
Consequently, many investors in the market have started to diversify their investments
into other cryptocurrencies, and the trend has been evident in the decline of the
dominance index of bitcoin.
Three cryptocurrencies at the top of the market are considered as reserve assets or
safe haven assets.
They have low risk but low returns.
That is, a low return relative to other cryptocurrencies in the market.
Bitcoin, Bitcoin Cash, and Ethereum have drastically outperformed all of the
currencies and assets in the traditional finance sector year-to-date.
Investors like CNBC analyst Brian Kelly and cryptocurrency-focused hedge funds
spread out their funds across many cryptocurrencies with strong technologies,
active developer communities, solid markets, and applicability.
John McAfee for instance, has emphasized the necessity of private or anonymous
cryptocurrencies like Dash, Monero, and Zcash, as in the future, more investors
will seek out for cryptocurrencies that are capable of providing
a high level of confidentiality.
Combination of Low-Risk and High-Risk Cryptocurrencies
A healthy portfolio of cryptocurrencies would be a certain amount of funds spread
across both strong low-risk cryptocurrencies like bitcoin, Ethereum, and Bitcoin Cash,
and high-risk cryptocurrencies with lower market caps like Monero, Zcash, and Dash.
Squeeze, a prominent cryptocurrency trader, noted that price is not an accurate
representation of the size of a cryptocurrency.
Rather, investors should consider the market valuation of a cryptocurrency
to decide its potential and space to grow.
“For new investors in crypto, think in market cap. Not price per coin. Market cap gives an estimate of the potential growth. Price per coin doesn’t mean anything as the supply for each altcoin differs $0.1 per coin doesn’t mean it’s cheap $100 per coin doesn’t mean it’s expensive,” said Squeeze.
An example of a high market cap but low price cryptocurrency is Ripple.
The market valuation of Ripple is at nearly $40 billion but its cryptocurrency remains at $1.
Meanwhile, Dash, Litecoin, and Monero have tokens valued at more than $300.
Yet, their market valuations are substantially lower than that of Ripple.
For investors and bitcoin holders that have seen significant returns over the past few years,
diversifying funds across unique and potent cryptocurrencies could
lead to better returns in the short-term.
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