Ethereum Begins Strong Rebound Following Months of Decline
After experiencing several months of severe decline, Ethereum has begun a strong rebound. Many investors are inquiring whether they should diversify their cryptocurrency holdings into assets beyond Bitcoin. Matt Hougan, founder of ETF issuer Bitwise, provides intuitive criteria for investors by referencing previous internet investments.
Is It Time to Invest in Crypto Assets Beyond Bitcoin?
Hougan points out that after months of brutal decline (with ETH dropping nearly 60%), Ethereum has started to strongly rebound. ETH has increased by 53% from its low on April 12, with a 37% rise just in the past week. The reasons for this increase are manifold, including the successful implementation of major upgrades to the blockchain and a general market risk shift.
As cryptocurrency prices rise, many investors are asking whether they should diversify their holdings into assets beyond Bitcoin. Bitcoin is the king of crypto assets—largest in scale, most liquid, and most mature. Hougan believes Bitcoin is akin to “digital gold” and is the only cryptocurrency with the potential to become a significant global currency. However, he also advocates that most investors should hold other crypto assets.
Learning from History: A Look Back at Internet Investments in 2004
Imagine you wanted to invest in the internet in 2004. At that time, search was the dominant business, with Google reigning supreme. Investors might have thought: the internet is going to become massive. I will acquire the leading company in its primary market. This was a great strategy. Over the past 20 years, Google’s stock price has increased by 6,309%. However, the internet is a universal technology. It can be used not only for search but also for other areas such as retail, social media, video, B2B software, and more.
This means that in 2004, you could not only acquire Google but also acquire Google and the leaders in these verticals, such as Amazon, Netflix, Salesforce, etc. In fact, Google performed extraordinarily well, but other categories also did well, with Netflix performing the best, which was not obvious back in 2004.
Blockchain as a Universal Technology
Like the internet, blockchain is a universal technology. We can use blockchain to create better forms of currency (Bitcoin) or to create programmable networks for transferring “real-world assets” (Ethereum, Solana, Avalanche); people can build new types of applications (DeFi, DePin) or middleware that serves other blockchains (Chainlink); and we can also establish traditional businesses that support the crypto economy (Coinbase, Circle, Marathon Digital).
Hougan believes that we can leverage blockchain for many things we haven’t even considered yet today. Below are the historical returns of Bitcoin, Ethereum, Solana, and Chainlink over the past five years.
Invest in Bitcoin or Other Cryptocurrencies?
Hougan provides a simple investment philosophy:
If you believe that blockchain is primarily used to prevent fiat currency abuse, then buy Bitcoin directly. Because Bitcoin is the only cryptocurrency with a clear potential to become “money.” For competitors, surpassing Bitcoin in this domain will be extremely difficult, if not impossible.
If you agree that blockchain is a universal technology, then you should consider holding a basket of crypto assets: Bitcoin, Ethereum, Solana, Chainlink, etc.
In such a rapidly evolving, massive, and unpredictable field as crypto, Hougan’s advice is: Don’t worry about picking winners; invest in the big picture.
Risk Warning
Investing in cryptocurrencies carries a high level of risk, and their prices can be extremely volatile; you may lose your entire principal. Please assess the risks carefully.