Willy Woo is a New Zealander with 15 years experience founding multiple startups. He’s also an angel investor, traded derivatives during the 2008 world financial crisis and, since 2013, has been fascinated and excited about cryptocurrency. In this article, Woo presents his simulations of cryptocurrency index funds, which suggest that bitcoin is hard to beat. This year, the idea of managed portfolios and index fund portfolios has been on the rise, you can bet on many hitting the market in 2017. It’s a popular idea borrowed from Wall Street. For stocks 99% of index funds, namely a fund that buys the entire market passively, outperform actively managed funds. Sounds like a great idea for crypto-land right? I’ve been running simulations in the alt-coin markets to see if this is true. If so it would be prudent to diversify across many altcoins as a higher performance investment over bitcoin. The results are surprising. The simulations This simulation spans 16th October 2013 through to today – exactly three years. Earlier than this, and you’ll find the altcoin market was very undeveloped. My three-year span happens to nicely capture the last bubble of 2013, the long bear market of 2014/15 and its subsequent recovery until today. This is great, as it allows us to observe how indexes and bitcoin perform relative to each other in each scenario. For all of my indexed portfolio simulations below, I have rebalance them every 30 days to account for newcomers into the list and old dropouts leaving. Bitcoin vs the top-10 ranked altcoins proportioned by marketcap Bitcoin 4.6x vs Index 1.2x Bitcoin outperformed the altcoin portfolio by 3.8x. Surprisingly during the 2013 bubble, alts performed even higher, but lost more ground in the bear market thereafter. This pattern of alts having an edge in bull markets […]
