2018 has been a mixed bag for investors. After all-time highs around Christmas and the bull run in summer of 2017, prices have struggled but remained relatively solid with some growth over the past fortnight. Technical analysis and investor sentiment suggests this summer could see a repeat of the huge gains of 2017, and many commentators are envisaging an overall price increase surge over the coming months.
The question is how investors should prepare their portfolios for the coming period. Specifically, what kind of balance to maintain between the more stable coins like Bitcoin and Ethereum versus the more speculative array of altcoins on offer. This is relevant due to the way the crypto investment cycles have manifested over the past few years: During bull runs the market moves more towards the riskier investments of altcoins which offer higher returns, but the opposite is true wherein bitcoin holds stronger in a bear market.
So the question is: What way is the altcoin:bitcoin investment landscape shaping up for the next few months?
As a catch-up, here are some of the patterns that are widely observed when it comes to altcoins according to Hackermoon.com:
- Btc leads bull rally.
- Top altcoins follow behind bitcoin.
- Majority of altcoins rally behind bitcoin and top altcoins.
- Huge correction begins.
- Btc corrects, new floor price.
- Majority of altcoins follow, new floor prices as well.
- Drought for months to a year or two.
- Crypto space waits for “huge event/hype” to build momentum from.
- Rinse and repeat
So as investors become more confident and flush, the interest in skyrocketing altcoins grows and funds flow into those investments. Right now we are probably just past the “huge event/hype” stage, with many banks and hedge funds getting involved in crypto in the past few weeks.
Will this year be the same?
It is looking likely that there will be another stage of good altcoin performance in the coming months. This was echoed by Tom Lee, who set up the first crypto investment fund when he said this week that altcoins would see strong growth towards the end of the summer in his prediction. This would seem to be in agreement with forecasts of a bitcoin bull run in the next two months.
However, how you approach this strategy is difficult to figure out. Despite the extreme returns many coins have offered over the past few years, it remains the case that most altcoins are poor performers. In fact, when taking a basket of common altcoins, they do not outperform Bitcoin or Ethereum even in the medium term.
This is echoed by Vitalik Buterin, who this week said that most altcoins are way overvalued, with their price far-outstripping their worth and development progress.
There are two main takeaways from these implications. First of all, the potential altcoin surge is not likely to be extended to the shakier coins. In previous years, sometimes even blatantly worthless coins were hyped into huge price gains. This time around investors are warier, and there is less room for far-fetched promises in an industry that has matured a lot technologically. Secondly, the “HODL” mantra does not apply to altcoins really, so if you make money on an altcoin surge then make sure you don’t get caught hodling bags when the correction comes around.