Article contributed by Tin Money. Follow him on Medium here.
“It’s easy to make money when you have a lot of it” — Max Tegmark
It’s merely speculation on my part and yet I think it’s safe to say the average crypto investor follows a similar pattern. It starts when they hear about some meme coin having an insane price move.
The FOMO kicks in. They ape in. Then the “investment” tanks. But the hook is set, so they go looking for the next moonshot. They chase a few of those and maybe win a few here and there.
Then a bear market shows up and they get absolutely rekt. From that, they either: a) give up; or b) start learning. The ones that stick around know what Bitcoin has done in the past. But since Bitcoin seems like it’s already out of reach, they start chasing alts instead.
And then they get rekt again.
To be fair, I’m sure a few get lucky on the way. But bear markets exist for a reason. That’s when all the money goes out. It’s a zero-sum game and most are going to lose.
Alts are an ATM machine for VCs
The plain truth is, for most (if not all) retail investors, alts aren’t great. Generally speaking, systematically stacking $BTC is going to be the best bet.
Regular interval buys, like once a week or once a month will give the average nub a pretty good shot at seeing their wealth preserved with $BTC. The problem is, no one ever thinks they’re an average nub.
Especially the nubbiest nubs. They’re the worst offenders.
The trouble with nearly every alt on the planet is, they’re basically an ATM machine for VCs. Aside from a few “fair launch” projects here and there, the vast majority of the crypto projects we talk about today have early seed rounds.
Retail investors don’t get to participate in those early coin distributions. Early Polkadot investors bought in at $0.29 (equivalent). Early Solana investors got to buy at $0.04. Early Matic buyers got in at $0.00079.
The list goes on and on. Big question is, what did you buy in at?
For seed investors, they are basically guaranteed to 10–20x their bags during the first private round. By the time it gets to retail, most are already up 50–100x.
It’s literally the easiest money you can make on planet earth.
Bear in mind, that 100x is for early retail. By the time the YouTube (YT), CryptoTwitter (CT) hype train has left the station and the budding crypto investor is getting into the game, the VCs are up a few 1000x.
Also know those YT and CT “influencers” are 9 times out of 10 being “influenced” themselves by VC money. Or rather, the VCs are giving or selling them tokens on the cheap.
If you get lucky and catch a fat retail pump early, you’ll probably do pretty well. That is, assuming you don’t ride the wave all the way back down.
The question remains though, are alts worth the risk?
Lrn2Price in BTC
A good starting point is to ask if you would have been better off buying Bitcoin instead of buying a (fill-in-the-blank) alt. The answer is probably going to be “no”.
I picked the following tokens sort of randomly. Most you will have heard of. I included FXS because I’m invested in it and think it’s awesome. And yes, I bought retail — everyone did — it was fair launch.
These charts show Bitcoin $USD prices (white line) and the token price if you priced it in $BTC. As in, how much BTC (or Sats) would it take to buy the token, rather than cash.
The timeframe is generally around 12–18 months back, give or take. Some tokens haven’t been around that long, others go back further. Not super important to the analysis though.
BTC — Cardano
As you can see, Cardano briefly outperformed Bitcoin in June of 2020 and June of 2021. The rest of the time, you would have been better off buying BTC.
Bitcoin — Avalanche
Same deal with AVAX basically. Summer of 2020 and early 2022, AVAX did better than BTC. It also generally lags BTC pumps. Something to think about. But BTC would be the clear “winner” here as well.
Bitcoin — BNB
People often crap on my head for saying I invest in Binance’s BNB token. “It’s not decentralised!” they say. I say, so what. It’s a revenue-generating token that consistently outperforms BTC. Charts don’t lie…
Bitcoin — Polkadot
Another summer 2020 gem. The rest of the time, BTC was the place to be. But it’s close. This might pop if anyone actually starts using the chain(s).
Bitcoin — Ethereum
Before I became a BNB “maxi”, I assumed ETH would perform in a similar fashion. It’s the big-dog, “blue-chip” after all. It does better than BTC pretty often. Still not as well as BNB.
Bitcoin — Fantom
I’m a huge fan of the FTM ecosystem. I think it has a lot of potential. I also know it’s a terrible investment compared to BTC.
Bitcoin — FXS (Frax Shares)
Another one I’m a huge fan of. FXS is the share token for the FRAX stablecoin. It’s a solid revenue-generating token. It’s also brand-new, relatively speaking. Definite long hodl for me, despite generally under-performing BTC. Also worth noting that it appears to only loosely correlate with BTC. Too soon to say for sure though. My theory is FXS will anti-correlate in the future.
Bitcoin — Chainlink
Love the project. Tokenomics will likely improve with the recent staking option. This chart goes back a little further. LINK was smashing BTC early on. BTC still ended up being the better investment, generally speaking.
Couple of spots where MATIC was the better deal, but overall BTC would have been a safer play. Seems it’s not tanking as hard as some other alts though. Something to consider.
NEAR had a late bloom that looks awful similar to FXS’ run. Maybe they share the same VC hype man? I’m kidding, FXS doesn’t have a hype man, it was fair launch. BTC is still the better investment…for now 😉
Solana? Nope. The entire ecosystem is VC driven. I know a lot of people are bullish on this project. I’m not. Either way, BTC was clearly a better play.
Bitcoin — XRP
Peeps seem to be either really for, or really against XRP. I don’t really have an opinion on Ripple or XRP, but the chart is interesting. XRP was crushing BTC early on. Probably the whole SEC lawsuit thing screwed that up. From what little I do know, the tokenomics suck balls.
Why Price in BTC?
Like it or not, BTC is the grand-daddy of crypto. It’s also not VC controlled, nor VC hyped. That’s not to say BTC is entirely free from market manipulation. But in crypto terms, it’s one of the “fairest” tokens you can buy.
What these charts show is the relative strength of an alt vs. Bitcoin. The Bitcoin prices in USD are simply for illustrative purposes. Some clever folks trade in and out of alts and BTC as a way to stack more BTC.
As you can see from the charts, alts and BTC don’t always move lock step. It’s similar to how gold buyers will trade in and out of silver to stack more gold. Gold prices come down, but silver goes up? Sell silver to buy gold. Rinse and repeat in reverse.
Same deal with crypto. BTC prices starting to come down? Trade for SOL or ETH or whatever and ride that one up. Rinse and repeat in reverse.
Works for some, but I don’t mess with it.
I hope it goes without saying, investing in crypto is ridiculously high-risk. Like I say at the end of all my articles, I like tinkering with this stuff. I love the tech, I love the volatility. I love the learning.
I also know, and have known since I started, I’ll probably never get rich quick. I think I might get rich slowly and that BTC might save me from insane central bank policies.
Crypto might also collapse entirely. I’m a firm believer in long hodling un-leveraged real estate and physical gold as safe haven assets. I also invest in equities, I have a (theoretical) defined benefit pension in the pipeline and Social Security is also (theoretically) coming my way.
Crypto is mostly for the lulz. I am, however, also a recent Bitcoin convert. Most of my focus now is how to maximise my stack of BTC in the shortest time.
Thus, I tinker with alts.
I’ve wandered to and fro around which alts to tinker with. Of late, BNB and FXS are taking the cake. I momentum trade SOL, LINK, FTM and others from time to time.
Last few trades I zigged when I should have zagged. Still up overall, but my hit rate is coming down. Nevertheless, the vast majority of my crypto budget is in cash.
I’m just waiting for the Fed to turn the printer back on. Then it’s BTC buying season as far as I’m concerned.
Alts be damned.
Well, except for FXS and BNB. And maybe PING. And Axelar. And AQUA. Oh, and GALA. Ooh, and THETA maybe. And RUNE. Redemption maybe? Hmm.
Guess I still have my tinker hat on.
Here’s a quick shill for a Medium subscription. Subscribing will make you invisible at will. It will also help me buy a cup of coffee. Please and thank you.
And remember, these are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.