Evolve Beyond 'Altcoin': Embracing Crypto as a Diverse Asset Class

The U.S. presidential election has seemingly alleviated headwinds for crypto, with bitcoin reaching $100K and regulatory wins including the nomination of crypto-friendly Paul Atkins as SEC chair, the naming of crypto advocate David Sacks as the White House 'AI and Crypto Czar,' and Congressman French Hill's appointment to head the House Financial Services Committee. As election season comes to a close in 2024, some forecast 'altcoin' season to continue in 2025, where non-BTC crypto assets outperform. However, is this the right way to characterize digital assets broadly? The crypto economy is often oversimplified into two groups: bitcoin and 'alt' coins. Nearly 16 years since bitcoin's inception, an explosion of crypto innovation has pushed blockchain assets beyond this binary classification, necessitating that investors treat crypto as a diverse multi-sector asset class. The 'altcoin' moniker may imply that digital assets other than bitcoin lack size and industry-specific purpose compared to other asset classes like equity markets. Comparing market caps of top crypto assets ex-BTC to S&P 500 constituents shows similarities in size and sector diversification. The top 25 crypto assets ex-BTC have market caps similar to those of well-known companies, spanning various industries. Constructing diversified digital asset portfolios for the long-run requires moving beyond a binary 'bitcoin vs. alts' approach. Thoughtfully constructed, diversified exposure to all crypto sectors helps defray asset concentration risks and provides a larger number of return sources. Given the fast-changing nature of the digital asset landscape, it is crucial to adopt a process for choosing and adjusting the universe of assets, allocating sensibly via passive or active management, and embracing the broader crypto economy as an asset class within investment portfolios.