Delphi Digital, a research firm focused exclusively on crypto and digital assets, presented data that shows Bitcoin and Ethereum outperformed weighted average market cap crypto and DeFi index funds. The most popular forms of investments over the past two decades have been index and exchange traded funds (ETF). These investments are popular because instead of investors focusing on individual stocks which come with heightened risks, the ETFs give them a passive approach to gain exposure to a basket of stocks.
Crypto is Changing How we Look at Investments
The investment trend has widened its footprint since 2018 with investors extending their portfolios to the crypto sector. Products like the Bitwise 10 Large Cap Crypto Index (BITX) keeps them updated as it tracks the total return of Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Chainlink (LINK), Cardano (ADA), Uniswap (UNI), Stellar (XLM), Solane (SOL), Bitcoin Cash (BCH), and Polygon (MATIC).
Investing in crypto gives investors the ability to access several top projects using one weighted average market cap index. To investors, this is a great way of spreading out risk and getting access to other digital assets. Now the question remains whether such products give investors better results regarding protection against volatility and more profits as compared to the top-ranking cryptocurrencies.
Tug of war between HODLING and Crypto Baskets
Delphi Digital dug into the performance of Bitcoin after the December 2018 market bottom and compared this to the performance of the Bitwise 10. The results of their research painted a better picture for investors who had held BTC than BITX, even if the latter had a slightly less volatility.
Bitcoin price vs. Bitwise 10. Source: Delphi Digital
The Delphi Digital report pointed out that individual assets cannot get outperformed by indices because the latter are lower risk portfolios as compared to holding individual assets. This is why it does not come as a surprise when BTC outperforms BITX on a cost basis.
In a nutshell, there are hot as many benefits of investing in an index as compared to BTC because the crypto market is volatile-in-nature and there are altcoins feel the pinch when there are frequent large drawdowns.
Ethereum Outshined DeFi Baskets Too
The DeFi Pulse Index (DPI) is focused on tapping into the power of decentralized finance, especially decentralized exchanges. The DPI token gives investors access to 14 of the top DeFi tokens including Sushiswap (SUSHI), Uniswap (UNI), Compound (COMP), AAVE, Maker (MKR), Synthetic (SNX), and Yearn.finance (YFI).
Ether price vs. DeFi Pulse Index price. Source: Delphi Digital
The chart above shows that since the inception of the index (DPI), a comparison of its performance to Ether gives Ether an upperhand regarding volatility and profitability. This is evidenced by a 57% Drawdown on Ether compared to 65% for DPI.
It is now clear that BTC and ETH have shown their potential as the top lower-risk cryptocurrency investments as opposed to the crypto index funds that expose investors to a wider range of assets.
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