Matthew Hougan, Chief Investment Officer (CIO) at Bitwise Asset Management has shared his outlook for crypto – specifically why Ethereum may be good addition to an investor’s portfolio.
Hougan stated in an X post Investors may add ETH as part of their portfolio for three different reasons. One reason is to keep their Bitcoin portfolio.
Hougan warns that his remarks do not represent investment advice. He believes that the launch of Ethereum spot ETFs is imminent in the US, and most investors will find it a great time to invest in the second-largest cryptocurrency on the planet.
Why should you consider ETH as a part of your portfolio?
Hougan believes that it comes down to diversification. Bitcoin and Ethereum use cases are different, and they target historical and other analyses. Here are three of them.
He compares, in his comment on diversification, the landscape of the market during the dot.com bubble to that currently. He wrote:
“It is very hard to predict the future with precision. Ask any investor from the dot-com boom who bought AOL or Pets.com. They got the overall bet right—the internet is going to be big!—but the specifics wrong.”
The crypto technology is one of the most promising technologies in the market today. While it’s difficult to predict the world of tomorrow, there is one way you can do it. “own the market.” This scenario could see 75% BTC, 25% ETH. “a good default starting place.”
Bitwise’s exec believes that the second reason it may be a good idea to add Ethereum to your portfolio are Bitcoin and Ethereum use cases.
Bitcoins are a relatively new currency. “the best form of money that has ever existed,” Ethereum’s goal is to program money. Stablecoins, DeFi and other applications are also based on the new system.
While it is hard to determine which new applications are going to benefit from this technology, a portfolio with a broader range of BTC and ETH exposure may be able to make use of the latest technologies.
Hougan believes that historical analysis is the third and final reason.
“Adding ETH to a portfolio over a full crypto market cycle has historically boosted both your absolute and risk-adjusted returns compared to adding BTC only,” He said.
A portfolio example with ETH
Sample portfolio performance from May 31 2020 to May 31 2024 shows a 60/40 traditional portfolio with a return cumulative of 31.47%, and an annualized return only of 7.06%.
Comparatively, adding 5% of BTC to a similar portfolio will increase the cumulative return to 54.49 % and the annualized returns to 11.46%. With ETH, the cumulative and annualized return jumps up to 56.32%.
The portfolio which includes ETH has a better return, and a smaller maximum drawdown.
Hougan adds:
“My view, in a word: If you want to make a broad bet on crypto and public blockchains, you should own multiple crypto assets. If you want to make a specific bet on a new form of digital money, buy Bitcoin.”
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
“ItsDailyCrypto is not responsible for any activities you perform outside ItsDailyCrypto.”
Source: crypto.news
