Bitwise CIO Matt Hougan makes the case for diversified crypto investment, even as he hails Bitcoin as an important asset.

Hougan said that while “Bitcoin is the king of crypto assets”, citing that it is the largest cryptocurrency, while having the most liquidity and being well known.

Bitwise Investment's CIO, Bitwise CIO Matt Hougan, known for his contributions to the crypto space, has penned an interesting piece on the implications of diversified crypto investment.

In his analysis, he highlights the exceptional performance of Bitcoin as the largest and most liquid cryptocurrency, a factor that contributes to its shot at becoming a major global currency.

He further emphasizes the importance of investing in other cryptocurrencies for optimal returns, drawing a parallel with the historical performance of internet companies.

As investors in 2004, faced with Google's status as the dominant player in the internet sector, would have been inclined to invest heavily in the company. While Google's performance with a 6300% return in the subsequent 21 years is noteworthy, investing in other internet companies, especially considering the broad scope of the internet, would have yielded even more significant gains.

This is evident in the cases of Netflix, Amazon, and Salesforce, which emerged as leaders in different verticals of the internet economy.

With returns of 50,000%, 10,000%, and 7,000%, respectively, these companies delivered massive gains, dwarfing Google's return during the same period.

In essence, while Google commanded attention as the largest and most liquid asset in the internet sector, it was investing in the big picture—the entire internet economy—that brought the greatest rewards.

Similarly, crypto investors today are faced with a similar decision.

"You can use a blockchain to create a better form of money (Bitcoin) or to create a programmable network for transferring real-world assets (Ethereum, Solana, Avalanche). You can build new types of applications (DeFi, DePin) or middleware that services other blockchains (Chainlink). You can also build traditional businesses that support the crypto economy (Coinbase, Circle, Marathon Digital)."

Over the past 20 years, actively managed US equity funds have underperformed their benchmark indexes 97% of the time. It’s more important to invest in the big picture than to try to pick winners. After studying history, it makes sense to own a basket of cryptocurrencies—like Bitcoin, Ethereum, Solana, and Chainlink.

In the last 4 years, different crypto assets emerged as the #1 performer in different years. It’s impossible to predict the cryptocurrency winners of 2030.

The case for crypto indexing in 10 sentences—and two charts.

Say it’s 2004. You know the internet is going to be big. Search is its killer app, and Google is king.

If you’d invested in Google, your money would have grown 64x since then. Smart move.

But the internet turned out to be broader than one company. It’s a general-purpose technology with uses in retail, social media, and software.

Investors who put money in other internet companies would do well, too.

In fact, the highest-performing stock in this period is (drumroll) Netflix—up 50,000x.

Amazon and Salesforce also rack up 10,000x and 7,000x gains, leaving Google as the worst-performer among this group.

It’s a familiar story for crypto investors today.

Bitcoin is the king of crypto assets. It’s the largest, has the most liquidity, and is the best known—the only digital asset with a shot at being an important global currency.

But like Google, Bitcoin is one asset in a broader ecosystem.

Investors who put money in other crypto assets—across DeFi, middleware, and infrastructure—would also reap huge rewards.

This is a paid sponsored article. Cryptocurrency is a volatile investment product and may not be suitable for all investors. Before investing in cryptocurrency, be sure to carry out your own research and invest according to your own risk tolerance.