It’s been said that most active stock pickers underperform a plain index fund over long stretches. The crypto version of that assertion is shaping up to be even more lopsided, as most tokens will eventually go to zero, or simply fail to keep up with the two coins, Bitcoin (BTC 0.82%) and Ethereum (ETH 3.22%), that already command a healthy majority of the entire sector’s market cap.
That poses an interesting question from a portfolio allocation perspective. If Bitcoin and Ethereum have been the biggest and most successful coins for years, is there really a point in getting exposure to any other cryptocurrencies?
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These assets confer exposure to different trends
Bitcoin’s job in a crypto portfolio is to be a scarce store of value.
It already has all the financial infrastructure it needs to accomplish that task effectively. Spot Bitcoin exchange-traded funds (ETFs) hold 6.2% of all coins issued, and corporate treasuries hold around 4%. Those buyers tend to sit on their holdings rather than flip them for a small profit. They wouldn’t be holding something they didn’t think was valuable.
Today’s Change
(-0.82%) $-640.19
Current Price
$77360.00
Key Data Points
Market Cap
$1.5T
Day’s Range
$77228.00 – $79389.00
52wk Range
$60255.56 – $126079.89
Volume
46B
Ethereum, on the other hand, is the closest thing that crypto has to a bet on everything that isn’t Bitcoin.
It hosts 54% of all decentralized finance (DeFi) value locked, with $45.3 billion in total value locked in its protocols, not to mention around 65% of all the distributed tokenized real-world assets like stocks and bonds that exist, as well as the bulk of all stablecoin supply. Owning the base layer means getting exposure to that very large surface area without forcing you to pick winners among hundreds of competing apps, most of which will inevitably go the way of the dodo.
Put those two coins in a portfolio, and you’ve covered the two most durable theses in crypto.
Today’s Change
(-3.22%) $-76.99
Current Price
$2312.90
Key Data Points
Market Cap
$279B
Day’s Range
$2308.57 – $2420.19
52wk Range
$1729.91 – $4946.05
Volume
21B
The case for stopping there
Going beyond Bitcoin and Ethereum might sound like a wise movement toward more diversification. In practice, it tends to be more like diversification away from proven assets and toward speculative bets that do incredibly poorly during drawdowns.
That doesn’t mean you should feel confined to a two-coin portfolio. It does mean that stepping off the well-beaten path and buying altcoins is far more likely to end in disaster than in getting rich.
In terms of how to construct your portfolio using the two-coin concept, an 80/20 split favoring Bitcoin is a decent place to start. The overweighting of Bitcoin reflects its lower volatility, deeper institutional bid, and scarcity. The Ethereum position gives you exposure to whatever comes next, whether it’s tokenized Treasuries, stablecoin payments, artificial intelligence agent payment ecosystems, or something else that’s not yet invented.
Rebalance once a year, and let the two assets do the work. If you get tempted to buy something else, especially if it’s something outside the crypto majors, keep your allocation very small, at least until you have evidence that your investment thesis is working.