Outperforming Bitcoin

For many digital asset investors, bitcoin serves as a psychological benchmark. However, beating it has proven to be a challenging task in recent years, leading some to reconsider alternative investments. But has bitcoin always been a tough act to follow? To answer this, we analyzed data from 2019 for the top 150 tokens by market capitalization, excluding memecoins and considering minimum volume requirements on major exchanges. The results show that in 2019 and 2020, several tokens outperformed bitcoin by a significant margin, with some exceeding its returns by over 1000%. Notably, these outperforming tokens were often found within the top 30 by market capitalization. However, post-2021, the landscape has changed, with only 10-20% of the top 150 tokens beating bitcoin in any given 365-day period. The average outperformance has also decreased to around 100%, with the average market capitalization rank of these outperforming tokens increasing to around 60-80. This shift suggests that identifying winners now requires more skill than in the past, as the cryptocurrency market has evolved and now demands tangible results from projects. While selecting a few high-conviction names may not be enough to beat bitcoin, smaller projects still hold significant potential. The data indicates that crypto market returns follow a power law distribution, where a few top performers can drive an overall positive portfolio result. This underscores the importance of diversification, particularly in the liquid token space, where investors can benefit from adopting venture capital-style approaches while leveraging the liquid secondary market. Alternative investments have a promising future, but investing will not be without its challenges.