We’ve been talking a lot about crypto markets lately.
In fact, we just launched a new column exclusively for this emerging asset class.
As JC mentioned this morning, we’ve found quite the winning formula in selfishly pursuing projects and creating content that WE like. Fortunately, it usually turns out that our readers and clients think what we do is cool and valuable too.
Just like our new Saturday Morning Chartoons, everything we’re doing with crypto lately is another great example of this self-serving strategy of ours.
Along those lines, we just created a custom index for cryptocurrency that we think is pretty damn neat. It also got us thinking about something…
This is our custom “Crypto NEXT 50 Index.” It’s an equally-weighted view of the largest crypto assets by market capitalization, excluding Bitcoin. Check it out:
Recent price action suggests that the entire crypto space has been struggling for more than a month now… It’s NOT just Bitcoin. This naturally volatile asset class is going through a period of broad selling pressure right now.
Those April and May pivot lows around 12 are critical. If this level breaks, expect the entire area to be messier for longer, with the majority of coins likely making a fresh leg lower before carving out a tradeable bottom.
And to be fair, while the vast majority of coins have participated to the downside in recent weeks and months, Bitcoin led the space lower and endured more damage than most along the way. This is illustrated in the chart below, as BTC peaked and began consolidating well before the index itself.
What sticks out most here is that these two charts really aren’t as correlated as you’d think.
The Next Index is still higher by roughly 4x year-to-date, even after the recent drawdown. Meanwhile, Bitcoin has given back so much of its earlier gains that it’s only up about a measly 25% on the year at this point.
And this begs a whole new question…
Now that crypto is officially an asset class of its own, what is its benchmark? There’s no Dow Jones Crypto Index… No MSCI Cryptocurrency. Are we just supposed to use Bitcoin as the benchmark forever?
And why is it already such a foregone conclusion that Bitcoin will remain the bellwether among its crypto rivals? Never underestimate the advantage of being a first-mover… But we think this could surely change with time. In fact, its dominance from a market cap perspective is already on a steady decline.
We think the Next 40 Index is a much better benchmark when measuring the relative performance of an individual cryptocurrency vs its peers. This has evolved into an incredibly diverse universe of digital assets. To assess the relative strength or weakness based on just a single coin seems nearsighted.
Or is the argument that Bitcoin is so dominant that it should be the benchmark still a valid one?
As always, let us know what you think about all this.
And has the market already crowned Bitcoin as crypto’s big winner? Or, is it still too soon to tell?