3 Reasons Bitcoiners Should Buy Ethereum, According to Bitwise

Ethereum ETFs on the Horizon in the United States, Should Bitcoin ETF Holders Divert Their Crypto Holdings to ETH?

In a Twitter thread on Thursday, Bitwise CIO Matt Hougan offered three reasons why this might be a good idea.

Why Bitcoin Holders Should Buy Ethereum

The first, Hugan writes, is for diversity. Since the future of crypto is difficult to predict, holding a stake in both major assets gives investors relief in case one asset becomes obsolete or the other rises over time.

“Ask any investor from the dot-com boom, when AOL bought Pets.com,” Hogan said. “You got the general bet right – the internet is going to be big! – but the odds are wrong. Disappointment!”

According to TradingView, as of this writing, Bitcoin's market cap accounts for 55% of the total crypto market. Ethereum includes 18.6%.

While ETH has generally performed fairly well against Bitcoin over the past five years, its dominance over major crypto has been slowly waning since the September 2022 merger. Still, the ETH/BTC ratio saw a slight boost last month when the US spot ETF was approved for adoption.

Second, Hugan said the fundamentally different nature of Bitcoin and Ethereum makes it difficult to choose between them. While Bitcoin was optimized to be a “hard currency”, Ethereum was designed for “programmable money” for blockchain applications such as stablecoins and DeFi.

“Adding some ETH to most BTC positions gives you a wider exposure to all that public blockchains can do,” he said.

BTC and ETH show the best performance together

Ultimately, Hugan says, the historical performance of both assets shows that they perform best when balanced together in a portfolio.

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

Interestingly, during that time it had less “peak decline” than the BTC-only portfolio, pulling back only 25.19% compared to 25.35%.

However, Hugan said there is still a major reason why investors want to stick with BTC only.

“It is very likely that Bitcoin will emerge as the main new type of “money” in crypto, said Hougan, referring to its huge existing leadership and the community's inclination towards this market.

“Cash is a big market. If BTC succeeds, there's a lot of room to run,” he said.