Following the U.S. presidential election, the challenges to crypto have significantly lessened. Since November, bitcoin has approached $100K, buoyed by regulatory victories like the nomination of pro-crypto Paul Atkins as the SEC chair, the appointment of crypto supporter David Sacks as the White House’s AI and Crypto Czar, and Congressman French Hill’s leadership role in the House Financial Services Committee. With the election season wrapping up favorably for crypto in 2024, there are predictions of an upcoming “altcoin season”, a time characterized by the outperformance of non-BTC crypto assets, which some expect to extend into 2025 — but is this the most accurate way to portray digital assets?

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Market analysts frequently categorize the crypto ecosystem into two overly simplified groups: 1) bitcoin (and occasionally ether) and 2) alternative or “alt” coins. This bifurcation was reasonable during the formative years of digital assets, when bitcoin was at the forefront of blockchain technology, while other applications were still being developed. Nearly 16 years post-bitcoin's inception, a surge in crypto innovation and specialized applications has moved blockchain assets beyond this simplistic classification. It's crucial for investors to see crypto as a varied, multi-sector asset class.

Assessing the Digital Asset Class

Labeling other digital assets as “altcoins” implies they lack the scale and clear industry functions that accompany components of traditional asset classes such as equities. Figure 1 below illustrates comparisons between the market capitalizations of the top crypto assets (excluding BTC) and their S&P 500 counterparts, revealing parallels in both size and sector diversification.

Figure 1: Market Caps of Top 25 (ex-BTC) Crypto Assets vs. S&P 500 Smaller Components

Not only do stocks of certain renowned companies reflect similar sizes to leading crypto assets (e.g., Solana's market cap is comparable to that of UPS), but these asset classes also span diverse industries. While the number of digital assets listed here is minor compared to the stock market, these cryptocurrencies, along with new, innovative projects, are expected to broaden the asset class's scope considerably over time.

Building a Strong Digital Asset Portfolio

Adopting a simplistic “bitcoin vs. altcoins” perspective on digital asset investments might neglect the potential benefits of diversified portfolio strategies. Gaining thoughtfully curated exposure across different crypto sectors helps mitigate concentration risks, ensuring that portfolios capture the full spectrum of value the asset class offers and provide numerous return sources within an overall asset allocation. Given the rapidly evolving nature of the digital asset field, constructing flexible crypto allocations that adapt to this breadth is essential. This involves selecting a universe of assets for your portfolio, adjusting this selection over time, and allocating wisely to these assets through either passive or active management strategies. Recognizing the broader crypto market as a legitimate asset class within investment portfolios necessitates strategies designed for long-term success.

Final Thoughts on an Evolving Asset Class

A focus solely on bitcoin compared to all other assets may overshadow the substantial and swiftly developing presence of multiple crypto assets, potentially causing investors to miss longer-term benefits associated with a holistic view of the asset class.