ALL IN BITCOIN

What's up, Graham? It's guys here. So, I have to say, after hearing story after story about someone turning 17 into six and a half million with Shiba Inu, we're going all in Dogecoin for a 2.8 million dollar payout or investing a thousand dollars in Bitcoin and then having 4.8 million dollars by your 18th birthday. It kind of makes you wonder, how could I do that too? Especially if a 12-year-old can make four hundred thousand dollars in two months selling NFTs.

You know, even though some people might chalk this up to luck, perhaps there's another explanation based on data analysis and science to replicate the exact strategies that make the most amount of money possible in cryptocurrency. And that is what brings us to today. I've been in contact with the Reddit user Knob Jobs over at Market Sentiment to analyze the performance of more than 2,000 different cryptocurrencies to figure out which ones do well and whether or not it's possible to generate consistent predictable returns without dumping it all in Dogele on Mars and then hoping for the best.

So, if you appreciate the attention to detail, feel free to subscribe to Market Sentiment down below in the description. Who's spent an entire week putting this together. He's not sponsoring this or anything, but I know how much time he puts into this type of research. So, if you find it helpful, it would mean a lot. Oh, and by the way, it's proof that I kept my word about buying five cents of Shiba Inu for every single like my previous video received. Congratulations! I now have 266 million worth of Shiba Inu.

And since we're on a roll here, I may as well invest another five cents into either Dogecoin or Shiba Inu for every single like this video gets. Just comment if you want it to be Dogecoin or Shiba Inu, and I'll invest in whatever one gets more comments. So, thank you guys so much! Now, with that said, let's begin.

Alright, so when it comes to investing in cryptocurrency, the one thing missing is a reliable blueprint for people to follow without risking everything to make it big. I mean, it's not like the stock market where people could point and say “oh, well, a diversified portfolio of 80 stocks and 20 bonds is expected to produce an average annualized return of eight percent a year, just for inflation with dividends reinvested based on the last 100 years of historical data." Instead, you just got this gas station worker who became a millionaire and quit his job after he invested in Ripple. There were articles about a 19-year-old now worth 25 million dollars thanks to Monero going to the moon.

So, replicating those strategies may as well be impossible without the same luck as it would take to win the Mega Millions lottery. But after almost 10 years and 2,000 cryptocurrency projects, there begins to emerge a trend for people to follow to predictably invest in a way that consistently makes money that's not a Ponzi scheme. That's what brings us to this work here.

To do this, they started by extracting the daily trading data across 317 different brokerages in 1985 coins to find a reliable method of cryptocurrency investing based on historic price, market capital, and trading volume going all the way back to 2013. The results were very surprising. On the surface, he found that if you compared the first listing price on an exchange with the current prices last traded, only 40 percent of them have gained value. That's it! So, right off the bat, if you blindly buy into everything that comes up, expect about 60 percent of them to lose value or break even at the very best.

Now, even though that might sound pretty bad, believe it or not, this is actually pretty similar to a previous analysis on IPO investing, where a company trades openly in the stock market for the very first time. In this case, it was found that over a three-year period, had you bought into an IPO stock the very same day it started trading, 64 percent of the time you would underperform the market by more than 10 percent.

It's the ratio between fresh IPOs and cryptocurrencies that seems relatively similar until you start breaking it down a little bit further. That's because even though only 40 percent of cryptocurrencies actually gain any value, the ones that do end up doing really, really well. The average gain across the winners was a staggering 3,048 percent.

Now, even though that sounds like a ton—and it is—what's even more surprising is just how much of that is driven by a few outliers who skyrocket past the moon and go to Mars. Because if you remove the top one percent of cryptocurrencies from that gain, your return drops all the way down to 641 percent. And if you remove the top five percent, your overall return drops down to pretty much that of the S&P 500.

That means of the 40 percent that actually gain any value, only 2 percent of that push your returns up higher than that of the stock market long-term. For the other 98 percent of cases, you would have been better off becoming a boring dollar-cost averaging investor into Boomer stocks instead.

However, we're not done yet, because now that we know that the majority of the market is driven by a few of the largest cryptocurrencies, we can figure out how to identify those early on so that you're not stuck with a few losers who just drag your portfolio through the mud. To do this, Market Sentiment analyzed a strategy to invest in the top 10 cryptocurrencies every single month based on total trading volume. That way, you're not just blindly buying into projects because they promise to save the world or are promoted by an ex-member of The Phase Clan, but instead you're strategically buying into cryptocurrencies based on the current performance of the market.

Now, in this case, he analyzed two different ways to invest. The first buys an equal amount into the top 10 currencies beginning on the first of each month. The second is to weight your investment based on the total trading volume, meaning the higher the volume, the more you would invest, just like with the S&P 500.

Now, the first scenario had you just invested a hundred dollars a month into the top 10 coins equally beginning in 2014. You would have invested a total of $9,390, and today you would have, wait for it, we need a drum roll here: $990,410 for an over ten thousand percent return.

Now, even in the second scenario, weighting your investments for the most traded coins, your $9,390 would have turned into a $536,000 mini fortune with a 5,700 percent return. Of course, at this point you might wonder, “But Graham, why is there such a big difference between the first and second scenario? And why would I have just been better off investing ten dollars equally into everything?” Well, that is a great question that I asked myself, and as you can see by the current illustration by Market Sentiment, the entire cryptocurrency market is heavily skewed and anchored by Bitcoin.

It's overwhelmingly the most traded cryptocurrency. Because of that, had you weighted your investments beginning in 2014, most of that would have gone into Bitcoin, which leaves less money left over for other more speculative investments, which so far had done pretty well. This is sometimes referred to as the Bitcoin dominance chart, which measures Bitcoin's market cap relative to the rest of the cryptocurrency industry.

The general thought is that if Bitcoin rises, so does the value of pretty much every other cryptocurrency alongside with it, and the opposite happens if Bitcoin falls and everything else begins selling off as well. In this case, Bitcoin dominance has been steadily falling after other options like Ethereum, Cardano, and a multitude of others have begun taking its place. But even despite that, Bitcoin continues to increase in price and bring an established foundation to the market that otherwise would not have existed.

Of course, it's important to remember that all of this data begins in 2014, before the vast majority of people even considered this to be an option, let alone a viable investment. So, it's only fair that all of this data would be adjusted for every year after that for everyone who didn't have the option to buy in Bitcoin back when it was $320. And even then, had you invested much later, the results are pretty amazing.

So, before we go into that, just for some context, the total return of the S&P 500 from 2014 until today is 182 percent with dividends reinvested. But had you started investing in cryptocurrency a year later throughout the top 10 coins, your return would be 9,652. If you started in 2016, your return would be 3,158. In 2017, the return is 629; in 2018, 336 percent, all the way until today, where we're up 38 in 2021, during a time where the S&P 500 is up a total of 18.22 year-to-date.

From that, I think it's pretty safe to say that so far investing a hundred dollars a month into the top 10 cryptocurrencies by volume on a regular basis has far outperformed everything else by a significant margin. The only other investment which really even comes close to this is Tesla, which increased in value over two thousand percent since 2016. But beyond that, very few public companies have seen the types of returns that a buy-and-hold crypto investor experiences throughout these last few years.

Even more surprising was that throughout the 2,000 cryptocurrencies analyzed since 2013, only 3 percent of them became completely inactive. Once they had reached the top 100 by trading volume, the chances of them dying out were extremely small. But even with all of this data, a few questions still remain.

Number one: How do we know this momentum is going to continue? And number two: How does this compare to the benchmark of just buying into Bitcoin on a regular basis and then calling it a day? Well, to find that out, there exists a website called dcabtc.com that calculates the return of every Bitcoin investment over time. As you can see, had you spent a hundred dollars a month buying Bitcoin since 2014, your $9,600 investment would have turned into a $549,000 value, which pretty much matches the return you would have gotten had you bought the top 10 coins by weight instead.

However, if we start this benchmark in 2016, Bitcoin saw a 2,700 increase, slightly lower than the 3,100 percent increase of buying the top 10 coins in equal proportion. Then since 2017, Bitcoin saw an 1,100 return, which is almost double that of the top 10 strategy. In 2018, Bitcoin saw 435 percent return to the top tens 336. And every year since then you would have received a higher return just investing into Bitcoin on a regular basis rather than splitting your investment across the top ten.

It seems as though so far the top 10 strategy was only able to outperform prior to 2016 when several of the altcoins were trading for a fraction of the value as they are today. I would imagine over time, as the top 10 establishes itself with more stability, this strategy might not be as effective moving forward compared to just buying Bitcoin in equal proportions every single month.

But there is one exception to this, and that would be Ethereum, which saw 3,078 return had you just invested a hundred dollars a month beginning in 2017, which is more than triple the return of Bitcoin. Then if you had started that in 2018 instead, you still would have seen more than double the return of Bitcoin. And that also applies throughout 2019 to 2020 and even today year to date.

So, in terms of past performance, Bitcoin wins had you bought in from the very beginning. But since 2016, Ethereum has seen a higher annual return consistently. Of course, obviously there are a few outliers here, like Dogecoin, which is up 5,100 year-to-date. But in terms of having a larger data set through consistent returns with an even bigger market cap, Ethereum seems to be one of the best performers.

Although even with all of that, the question then becomes, is this sustainable? And who's to say we didn't just see a massive run-up before everything goes down? Well, there's really not that much to compare to because there are very few tradable investments that have gone up in value so much in such a short amount of time on such a large scale across the world. Even though some people might want to call it a bubble, when you compare it side by side with previous events, you'll either come to the conclusion that it is the biggest bubble in human history or it's here to stay.

For example, the dot-com bubble lasted from 1995 through 2000, and there were dozens of companies who saw an increase of three thousand to six thousand percent before eventually bringing down the entire market when they couldn't post a profit. But the cryptocurrency market has already seen increases and drops that dwarf both sides of the spectrum over a longer period of time, leading people to believe that it might continue.

The same applies to the Japanese real estate bubble, which tripled in price from 1985 to 1991 before crashing down, along with the U.S. housing bubble, which only lasted for four years before dropping substantially. But in every event before us, the bubble popped sooner. It took longer to recover, and it was isolated to a specific region. The cryptocurrency market, on the other hand, outpaces everything before it and is extremely divisive.

You have some noble economists saying that it's a bubble; it has no intrinsic value, and they don't understand why the price isn't zero. But others believe it's a disruptive technology that's set to overturn the entire financial market, and its value is justified. Not to mention, even if it is a bubble, an ex-Bridgewater analyst claims that the global financial system is an even bigger bubble.

So, we could continue going higher for quite some time, as he says. As long as the world is flooded with money and safe assets offer poor compensation, Bitcoin will be relevant. And I agree with that. Of course, if history is any indication, we could end up seeing a 50 to 85 percent drop throughout the entire market relatively quickly, and that's something to consider.

But at the end of the day, it's been a very disruptive innovation, and that has so far been worth investing into. Now for myself, I'll admit it would be too much work to go and buy the top 10 cryptocurrencies every single month and dollar-cost average in. But since both Bitcoin and Ethereum provide a relatively similar return and help form the foundation of the entire markets, I'll just continue to take the lazy approach and dollar-cost average in those.

And that’s it! Although given all of this information, I think the real story is just this: sixty percent of cryptocurrencies have not seen any gain in value long-term whatsoever, and the remaining 40 percent are primarily driven by the performance of the top few.

Now, that's not to say that short-term some of these could see abnormally large swings if you're looking to trade momentum, but more often than not, long term, the top 10 cryptocurrencies see the majority of the price appreciation over years, not months. And to this day, almost all of that has been realized by both Bitcoin and Ethereum.

Of course, whether or not this continues is yet to be seen. But given how new cryptocurrency is relative to the rest of the market, all of this is going to be constantly changing, and only time will tell how this plays out.

But as Bitcoin approaches another all-time high following the release of a futures traded ETF, I'm more confident than ever that more adoption will follow, and eventually the price is going to become a lot more stable. Even the billionaire Carla Icahn believes that Bitcoin could be the best hedge for inflation during a time where the price of everything seems to be rising faster than the like button on this video, where every single like is another five cents invested in either Dogecoin or Shiba Inu.

And again, since all of this data only covers past performance, that's not to say that the future returns will look anywhere close to this. But regardless, I'm placing less than eight percent of my entire portfolio in cryptocurrency just to see how it does, and maybe one day I could pay for my AMC movie ticket with Dogecoin if it ever hits a dollar.

And lastly, a huge thank you to Knob Jobs over at Market Sentiment for aggregating all of this data, because this video would not be possible without that. So, as a thank you, I'll link to all of his information down below in the description so you could follow along with his work. Thank you guys so much for watching. I really appreciate it!

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Thank you guys so much, and until next time!