Today I heard a professional in the financial institutional space talk about what he expects the future is in terms of financial-crypto currency products and how financial institutions will expose themselves to the space. He went on to say that institutions ultimately will want to diversify and will seek financial products that can index crypto currencies. He went on to explain how he could envision these index's holding the top 10 cryptocurrencies by market cap or some other similar metric. Institutions would then want these products.
This subject and how the speaker talked about was an example of a legacy strategy being applied to a novel asset class. Complete forcing of a square peg into a round hole. What sounds like a good idea, in terms of spreading out risk and exposing your self to possible faster runners than bitcoin, ends up giving you the opposite result as it completely ignores the nuance of the space and therefor would ultimately under perform holding Bitcoin solely.
Using the speakers exact idea (though any similar metric would yield similar results) if you took the top 10 crypto's right now and slapped them together in an index, at the time of writing Doge Coin is number 9 and Shiba Inu is number 10. If you purchased a top 10 index, you would be buying these two coins; one being a joke with no development and the other being a joke of a joke with some bolted on development. This does not even speak of the extreme future uncertainty risk among the rest of the top ten, such as Etherium (which is completely changing it's consensus mechanism) or Cardano (which is more future promises than actual product).
If you purchased this top 10 index because you wanted exposure to the space but you didn't know who the fastest runners were; if you follow the cypto space long enough, you'll come to realize that Bitcoin is the king. If Bitcoin doesn't want the market to pump, it wont pump. If Bitcoin wants the market to dump, the market will dump. Beyond short term individual case pumps, the market is generally correlated to what Bitcoin does or allows the crypto market to do. So to attempt to capture faster horses in an index will have you still fighting the correlation they all have to Bitcoin and what Bitcoin does.
Buy Bitcoin,
The Bitcoin Advantage
