Crypto basket outperforms Bitcoin – Ethereum makes new highs

  • A basket of the top cryptocurrencies has returned 15% a month since 2015
  • Bitcoin in comparison has only returned 7% a month since 2015 and remains c15% off its highs
  • Ethereum has broken to a new high of 2593 today, with other altcoins following suit
Crypto basket outperforms Bitcoin – Ethereum makes new highs

bitcoin vs crypto index performance

Index construction

We have compiled a dynamic index of the top 10 cryptocurrencies (ex-stable coins) by market capitalisation, with each constituent being equally weighted (unlike traditional market cap indices such as the SP500). The index is rebalanced on a weekly basis and is inclusive of all expected fees.

Index performance

The numbers are quite frankly difficult to comprehend. Bitcoin has returned 17,871% since 2015, while the crypto index is up a whopping 4,759,989%

Absolute returns are one thing, but the index also outperforms on a risk-adjusted basis too, with Bitcoin having a Sharpe ratio of 0.9 and the Crypto Index a Sharpe ratio of 1.6.

Altcoin performance

There are around 4,000 existing cryptocurrencies. Those that are not Bitcoin are considered an 'alternative coin' or 'altcoin'.

Looking at just the top 100 coins (based on market capitalisation), we can see that Bitcoin sits in the middle of the pack, at #48, based on its average yearly performance of 190%. Its performance is dwarfed by those at the top of the list:

altcoin performance

Performance of top 5 coins (by market cap)

top 5 coins by market cap

Cryptocurrencies are relatively uncorrelated

Cryptocurrencies tend to have a lower pairwise correlation than stocks – increasing the performance for those holding a portfolio of crypto.

Since 2015, the 10 largest cryptocurrencies have an average pairwise correlation of 0.71, while the 10 largest stocks have a correlation of 0.87.

Stocks correlation

Cryptocurrency correlation

Source: Yahoo Finance API

The rolling three-month realised correlation (smoothed) of the top 10 coins demonstrates a longer-term trend towards becoming tighter, perhaps because the largest exchanges are offering access to a greater number of the coins. May 2020 saw the highest correlations - reaching 0.84. Correlations began loosening this year, with the current value at 0.68.

Crypto 3-month realised correlation (smoothed)

cryptocurrencies correlation

Crypto race

The pace of the crypto race is highlighted by how frequently the top coins change positions on the market cap leaderboard. On average, the order changes every 3 days. New coins are entering the top 10 every 10 days, meaning that the index has a new set of constituents.

For comparison, S&P Dow Jones Indices – the company responsible for managing the SP500 index – deems a rebalancing necessary only 4 times a year, while the Russell 1000 and 2000 get rebalanced once a year.

Ethereum breaks new highs

Source: Coinmarketcap

More volatility is expected going into 2022 but, ultimately, our machine-learning model indicates a target of 4,400 over the coming 12 months.

Most Viewed See latest

This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

Full Tellimer disclaimers