November 26, 2017
The takeaway from this article is…
Always stick to the leaders.
(Update) December 6th, 2017:
The above still rings true as we speak –
All cryptocurrencies corrected sharply in September of 2017.
What happened in the following 2.5 months differed between assets.
Lets touch on the three major ones by way of example.
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After declining roughly -40% in Sept, Bitcoin recovered all its losses in the following month.
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Moreover, it proceeded to gain +90% in the next month and a half.
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Ethereum, the other crypto that some argue is #2, showed mediocre performance after correcting -45%, staying in the 300 range for quite some time.
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Ether made new highs in late November after consolidating for two months, gaining +20%.
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Litecoin, the fifth cryptocurrency in terms of market cap, has finally recovered the -60% losses from September. It has actually fallen to the 7th largest in terms of market cap recently (Source: Nov. 2017).
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Unlike Ether or Bitcoin, Litecoin has not made new highs yet.
Concluding Thoughts
To recap, even though Bitcoin may have seemed expensive at $4000-$5000 USD in September, it was (and still is) the leading cryptocurrency (in terms of market cap). This means that in an event of a downturn, it is the most credible out of all the cryptos, and therefore should be the leading choice for institutional and retail investors should they purchase “on the dip.”
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In addition, if you noticed from the above charts, Bitcoin did not have as steep as a decline as some of the other cryptos.
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Bitcoin -40% vs. Ethereum -45% and Litecoin -60%
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Of course, there is the counter argument that Bitcoin will one day fall and Ether will take over as the #1 coin in the space. However, we don’t know if and when that will happen.
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For now, the safest bet is to simply stick to the winner.
Another example of a similar phenomenon can be seen with the stock performance of Nvidia and AMD, two semiconductor stocks that both benefited from a similar “rising tide.”
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If you invested in the “expensive” NVDA at around $100 a share the beginning of 2017, you would have roughly doubled your money.
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However, if you purchased AMD at the beginning of 2017, citing that this stock is “a cheaper way to play Nvidia”, you would have made a grand total of $0 this year.
Let me know your thoughts below, would love to hear what you think about what I’ve noticed.
