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Time for crypto investors to look beyond bitcoin for returns

New analysis by London-based Nickel Digital Asset Management (Nickel), Europe’s award-winning, regulated digital assets hedge fund manager is highlighting the need for crypto investors to start to look beyond Bitcoin for potential outperformance.

Bitcoin’s 155% surge in value in the past year to around $42,280 is capturing the attention of institutional and retail investors but Nickel believes now could be an opportune time to diversify into the wider digital asset market. It argues that following the initial stage of market recovery, when Bitcoin dominates the recovery trend, the dynamic tend to change as market enters acceleration stage.

The wealth generated by Bitcoin’s rally could significantly benefit smaller market cap protocols, which require less capital to potentially yield comparable or superior returns and also points to historical data.

Indeed, Nickel’s analysis of the previous bull market reveals that from a cycle’s low point in Dec 2018, Bitcoin initially outperformed other cryptoassets, with Ethereum lagging behind, while newer projects such as Solana even lost value.

However, by September 2020, Ethereum not only matched Bitcoin’s gains, by delivered 421%, while Bitcoin stood at 255%. As the cycle progressed, Ethereum went to deliver 57x return, compared to Bitcoin’s 21x. Furthermore, Solana, a newer protocol, had achieved over 270X growth underlining the potential for investment in the more diverse set of crypto assets, as compared to plain-vanilla Bitcoin. While all of the above assets delivered exceptional performance, some clearly offered better rewards for each unit of risk taken by crypto investors.

Global research[1] by Nickel found that 39% institutional investors who collectively manage $$3.5 trillion in assets say the current investment opportunities in the wider digital asset market are “very attractive” with a further 48% describing investment conditions as “quite attractive”.

Nickel says the current price surge in Bitcoin is being driven by a range of factors including the anticipated approval of a spot Bitcoin ETF in the US, as well as the Bitcoin halving expected in April. Macroeconomic conditions are also supporting the Bitcoin price with expected interest rate cuts boosting its attraction for both speculative technology investors and traditional gold supporters.

Anatoly Crachilov, CEO at Nickel Digital, commented: “While Bitcoin has been leading the initial recovery of the crypto market, a plethora of digital assets, first of all those utilising smart contract capabilities, are catering to a diverse range of use cases, from decentralised finance to tokenization of real-world assets and on-chain gaming.

“As the old proverb goes, the best time to plant a tree was years ago, the second best is now. We recommend dedicating time to research high-potential protocols beyond Bitcoin, with the aim of optimizing exposure to digital assets.”

Next Finance 15 January
Footnotes

[1] Nickel Digital data

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