In
a
recent

commentary
shared
on
X,
Matt
Hougan,
Chief
Investment
Officer
at
Bitwise
Asset
Management,
which
ranks
as
the
world’s
largest
provider
of
cryptocurrency
index
funds,
detailed
why
investors
should
consider
diversifying
their
cryptocurrency
portfolio
by
adding
Ethereum
(ETH),
alongside
maintaining
a
position
in
Bitcoin
(BTC).
Hougan
offered
three
compelling
reasons
for
investors
to
embrace
ETH,
while
also
presenting
a
critical
viewpoint
for
remaining
invested
solely
in
BTC.

Ethereum
Vs.
Bitcoin:
3
Reasons
Pro-Ethereum

Hougan
began
by
emphasizing
the
importance
of
diversification
within
crypto
investments.
Drawing
an
analogy
to
the
early
days
of
the
internet,
he
pointed
out
how
difficult
it
is
to
predict
which
technologies
or
companies
will
dominate
over
the
long
term.
“It
is
very
hard
to
predict
the
future
with
precision,”
Hougan
remarked,
referring
to
investors
who
bet
on
early
internet
companies
like
AOL
and
Pets.com,
which
failed
to
maintain
their
initial
promise
despite
the
internet’s
overall
growth.

 

Related
Reading

Applying
this
lesson
to
crypto,
Hougan
advised
a
diversified
approach
to
hedge
against
similar
uncertainties.
Ethereum’s
current
market
capitalization
stands
at
approximately
$420
billion,
which
is
substantial
but
still
only
about
one-third
that
of
Bitcoin’s
$1.3
trillion
market
cap.
Given
these
figures,
Hougan
proposed
a

default
starting
allocation
of
75%
Bitcoin
and
25%
Ethereum
for
investors
seeking
broad
market
exposure.

Hougan’s
second
point
delved
into
the
functional
differences
between
Bitcoin
and
Ethereum.
He
described
Bitcoin
as
primarily
“a
new
form
of
money,”
highlighting
its
design
choices
aimed
at
enhancing
its
utility
as
a
robust
monetary
system.
“Every
design
choice
the
Bitcoin
ecosystem
makes
is
designed
to
make
Bitcoin
the
best
form
of
money
that
has
ever
existed,”
he
stated,
underscoring
Bitcoin’s
targeted
development
toward
optimizing
its
use
as
a
currency.

Conversely,
Ethereum
is
characterized
by
its
role
as
a
foundational
technology
for
building
new
applications
that
leverage
its
capability
for
programmable
money.
This
includes
everything
from
issuing

stablecoins
to
enabling
complex
decentralized
finance
(DeFi)
ecosystems.

“Ethereum’s
primary
function
is
making
money
programmable,”
Hougan
explained.
He
argued
that
the
ongoing
development
within
the
Ethereum
ecosystem
provides
a
broader
exposure
to
the
potential
applications
of
blockchain
technology,
which
is
still
in
its
nascent
stages.

 

Related
Reading

The
third
argument
for
Ethereum
centered
on
historical
performance
data.
Hougan
pointed
out
that
historically,
portfolios
that
included
Ethereum
along
with
Bitcoin
showed
better
performance
metrics,
both
in
absolute
terms
and
when
adjusted
for
risk,
across
full
crypto
market
cycles.

“My
favorite
thing
about
that
table
is
that
the
+ETH
portfolio
has
both
higher
returns
and
a
lower
maximum
drawdown,”
he
highlighted.
This
historical
analysis
suggests
that
Ethereum
could
offer
better
downside
protection
and
higher
potential
returns,
though
Hougan
cautioned
that
“past
performance
is
no
guarantee
of
future
returns”
and
noted
that
in
shorter,
recent
periods,
a
Bitcoin-only
strategy
would
have
outperformed.

Counterpoint:
Why
a
Bitcoin-Only
Strategy
May
Be
Preferable

Addressing
the
other
side
of
the
coin,
Hougan
discussed
why
many
investors
might
prefer
a
Bitcoin-only
strategy.
This
perspective
is
especially
relevant
for
those
concerned
with

macroeconomic
issues
like
the
degradation
of
fiat
currencies
and
inflation.

Hougan
posited
that
Bitcoin’s
dominant
position
and
its
community’s
focus
on
becoming
a
new
form
of
money
make
it
likely
to
continue
leading
this
space.
“It
has
a
large
lead,
and
size
matters
in
money,”
he
stated,
supporting
the
idea
that
Bitcoin’s
simplicity
and
focused
use-case
as
digital
gold
could
be
more
appealing
for
certain
strategic
investments.

 

“Money
is
a
massive
market.
There’s
plenty
of
space
for
BTC
to
run
if
it
succeeds.
[…]
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,”
Hougan
concluded.

At
press
time,
ETH
traded
at
$3,514.06.

Featured
image
created
with
DALL·E,
chart
from
TradingView.com

Go to Source
Author: Jake Simmons

Recommended Crypto Services, Products and Strategies: