Ethereum is beginning to wake up. Should we invest in crypto assets other than Bitcoin?

Ethereum has started to rebound strongly after a brutal few months of decline. Many investors have asked whether they should diversify their cryptocurrency holdings into assets other than Bitcoin. Matt Hougan , founder of ETF issuer Bitwise, used previous online investments as an example to provide investors with intuitive judgment criteria.

Ethereum is beginning to wake up. Should we invest in crypto assets other than Bitcoin?

Hougan noted that Ethereum has begun to rebound strongly after a brutal few months of decline (ETH fell nearly 60%). ETH is up 53% from its April 12 low and 37% in the past week alone.

There are many reasons for the rise, including the successful implementation of a major blockchain upgrade and a general risk shift in the market.

Many investors have asked whether they should diversify their cryptocurrency holdings into assets other than Bitcoin as cryptocurrency prices rise.

Bitcoin is the king of crypto assets—the largest, most liquid, and most mature. Hougan believes that Bitcoin is similar to "digital gold" and is the only crypto asset that has the potential to become an important global currency.

But he also advocates that most investors should own other crypto assets .

History as a mirror: Looking back at Internet investment in 2004

Imagine it’s 2004 and you want to invest in the Internet. At the time, search was the dominant business and Google was king. Investors might think: The Internet is going to be huge. I will acquire the dominant business in its most important market.

This is a great strategy. Over the past 20 years, Google's stock price has risen 6,309%.

But the Internet is a general technology. It can be used not only for search but also in other areas such as retail, social media, video, B2B software, etc.

What that meant was that in 2004, you could not only buy Google, but you could buy Google and the leaders in these verticals, like Amazon, Netflix, Salesforce, and so on. In fact, Google is doing very well, but other categories are doing well too, and the best performer by far is Netflix, which was not obvious in 2004.

Blockchain is a general technology

Like the Internet, blockchain is a general-purpose technology.

We can use blockchain to create better forms of money (Bitcoin) or create programmable networks for transferring "real-world assets" (Ethereum, Solana, Avalanche); people can build new types of applications (DeFi, DePin) or middleware that provides services for other blockchains (Chainlink); or they can build traditional businesses that support the crypto economy (Coinbase, Circle, Marathon Digital)

Hougan believes there are many more things we can do with blockchain that we haven’t even considered today.

Here are the historical returns for Bitcoin, Ethereum, Solana, and Chainlink over the past five years.

Invest in Bitcoin or other cryptocurrencies?

Hougan offers a simple investment philosophy:

• If you believe that blockchain is really only used to prevent abuse of fiat currency, then just buy Bitcoin. Because Bitcoin is the only crypto asset with clear potential to become a "currency". It will be extremely difficult, if not impossible, for competitors to surpass Bitcoin in this area.
• If you believe that blockchain is a general technology, then you would probably want to own a basket of crypto assets: Bitcoin, Ethereum, Solana, Chainlink, etc.

In a space as fast-moving, large, and unpredictable as crypto, Hougan’s advice is:

Don't worry about picking winners, invest in the big picture.

When it comes to investing and managing your finances, self-delusion is often your biggest enemy. Professional risk manager Santisa recently published a profound reflection on the social platform X, reminding traders that only through accurate records and rigorous benchmarks can they truly examine investment performance and make more rational financial decisions. This article is not just an investment advice, but also a financial management lesson of self-awareness and honest dialogue.

The common blind spot between investment and fitness: people often overestimate themselves

Santisa published a long article titled " Stop Deceiving Yourself: How to Set a Benchmark for Your Investment Portfolio ", using his own ten years of investment and three years of fitness experience as examples, revealing that people may fall into the trap of " feeling good about themselves " in both.

He admitted that he had tried to beautify investment data, ignore transaction costs such as wear and tear and fees, and even underestimated the calorie intake of a slice of cake and overestimated the effect of gym exercises in his fitness records; these behaviors reflected the avoidance of failure and imperfection.

The price of illusory victory: either making money or having a good deal

A conversation with a friend reveals the blind spots of many investors. When the other party boasted about a 12% return, they did not compare it with the 25% increase in the S&P 500 that year. In fact, they took a higher risk but did not generate any excess returns. Santisa noted:

If investors do not have a suitable benchmark or comparison, they will have no way of knowing whether their risk-return ratio is reasonable and will ultimately fall into self-hypnotic optimism.

(Well-known trader: Trading is an addiction worse than drugs. Two steps to help you get rid of 80% of bad trades )

Recording and Comparing: How to Really Evaluate Investment Performance?

In this regard, Santisa recommends that investors keep detailed records of the returns , cash flows and expenses of each investment, and clearly distinguish between personal net assets and investment portfolios to avoid interference with income and expenses. When choosing a benchmark, it should also vary depending on the type of asset: "For stocks, you can refer to SPY, QQQ, and for cryptocurrencies, refer to BTC or ETH."

Measuring performance is not about intuition, but about understanding the truth through strict comparison with standards.

He added, “More cautious investors can set a beta value for the target they want to invest in to measure its volatility and performance compared to a specific token.”

What in exchange for risk? Sharpe Ratio to See Real Returns

In order to understand whether the risk is worth it, Santisa also introduced the "Sharpe Ratio" as a measurement standard, as a key indicator that can consider asset returns, volatility and risk-free interest rates:

If the rate of return cannot offset the risk of volatility, then the investment strategy has no value.

He took the lending protocol AAVE as an example, emphasizing that in the DeFi world, it is also necessary to consider superimposed risks such as protocol risk, stablecoin risk, cross-chain risk, and set a minimum "deserved compensation threshold."

Only with honesty as a shield can you survive in investment

The lure of high pay is like a mirage. Santisa pointed out that he was once attracted by a product with a 20% return, but in the end he chose to exit according to the risk benchmark and successfully avoided disasters such as the collapse of Terra (UST). He emphasized: " Reason and discipline are the foundation of long-term success in investment. "

( The past and future of DeFi stablecoins: written after the collapse of Terra UST )

Santisa finally quoted Fyodor Dostoevsky's famous saying, reminding investors that if they want to achieve success in investment, they must bravely face performance and risks, without avoiding or glorifying them:

If a person cannot be honest with himself, he will lose the ability to judge the truth of the outside world.