Of the top 150 cryptocurrencies in 2017, only 12% were good investments

I had some free time this weekend so I decided to look at the cryptocurrency market from the last major bull run in cryptocurrency. Which was way back in 2017, I used coinmarketcap.com to get as close to the Bitcoin all time high as I could. The last all time high happened on December 15^th and it peaked around $20,000 or according to the graph on coinmarketcap’s website – $19,497.40. Unfortunately, the historical snapshot tool from coinmarket cap only allowed me to pull in between those days so I pulled the closest day which was December 17^th 2017. I looked at the top 150 coins from 2017 and compared them to the most recent snapshot – July 18^th 2021.

                For starters, we can easily see which cryptocurrencies no longer exist in the top 150 coins compared to last bull run. There are only 49 cryptocurrencies which were in the top 150 and are still in the top 150 coins today. Some of these names will be familiar to a lot of us. This means that only 32.6% of the top 150 coins remained in the top 150 coins compared to the last bull run. Or in other words, the vast majority of coins have fallen out of favor with the investment community over the last 4ish years.

But the next question in my mind is which cryptocurrencies surpassed their prior all time high and actually gave you a decent return on investment, assuming you had invested at the prior high. All of the following cryptocurrencies have surpassed their prior all time high within the past 2-3 months, meaning they would have been good investments. While literally every other cryptocurrency from 2017 either did not surpass its prior all time high or fell out of the top 150 coins during the 3-4 years in between.

So, if you had invested on December 17^th 2017 and made a broad investment into the top 150 cryptocurrencies that existed then, you would have lost money on 87.33% of them. And only 12.67% of them would have exceeded their prior all-time highs. If you had exclusively invested $1,000 in the cryptocurrencies that remained and exceeded their prior highs, the above list, you would have netted $208,273.45 as of July 18^th 2021. The vast majority of this return would have been from Aave which was worth $0.07 on December 17^th 2017 and it was worth $254.70 on July 18^th 2021. However, the chances of you investing only into the 19 coins that survived the bear market is incredibly slim. And you selecting the next Aave is literally a 1/150 chance or even less because you would have had to hold onto it until now and not sell.

If we removed Aave our return on $1,000 would be $8,055 which is largely due to Binance Coin, chainlink, and dogecoin which had returns of 5151%, 3612%, and 2945% respectively.

So, what can we learn about cryptocurrency here? Well the vast majority of our returns typically come from a few outliers, just like stocks do. And that picking cryptocurrencies that will perform well is ridiculously challenging, otherwise, we’d all be millionaires right?  And seriously, just like in 2017, I see tons of people here spouting ideas that their coin is going to be the next Bitcoin or Ethereum and that if you “get in right now!” you’ll make millions. Well chances are… those coins aren’t going to be the next Bitcoin or Ethereum, or even the next Aave, chainlink, or dogecoin, as those have been the best investments from 2017. The best chance we have is building an index fund and re-balancing it occasionally to remove the laggards and hopefully catch the up-and-coming stars like Aave or Binance coin.

My opinion with cryptocurrency is you should allocate some percentage of your net wealth to cryptocurrency and then as cryptocurrency performs well and begins to exceed the selected allocation, sell a portion of your cryptocurrency to bring it back down to your selected allocation. Then do the opposite as it drops.

I’d suggest only a small portion of your net wealth in cryptocurrency, or if you’re risk adverse, none at all. However, if you are interested in buying cryptocurrency you should use my referral link and get some extra crypto when you buy $100 worth of Bitcoin.

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