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Data visualisation: 118 coins plotted over time this is why HODL alt-coin indexes don’t work

Canvas Art - Shit run downhill 2016 edition

Do you like my canvas art? I’m calling it “shit runs downhill“. I’m thinking about mounting it on my wall to remind me of the perils of HODLing alt-coins. After finding out that alt-coin index funds don’t really work, I put together a data visualisation of alt-coin price performance as further research into why.

Here’s a plot of all alt-coins that have been floated onto the markets that have achieved at least an average of $250,000 market cap in any one year of their existence. I’ve plotted them at the starting lines from the first day of their market float to see how they performed against each other. The tally came to 118 alt-coins. Here’s my plot below.

Crypto-currency price history

Can you see why it’s really hard to beat bitcoin now? That red line is bitcoin, by the way.

All my friends are asking if that wiggle above bitcoin is Ethereum. Sorry no, it’s GAME, I don’t know what that is, but it’s likely a statistical aberration – someone’s gotta get lucky. I mean when I look sideways, it’s like a rocket engine, some of the exhaust flames go to the edges, it’s just thermodynamics.

Zooming in by year

Breaking this down to make more sense of it, I’ve grouped them by year of initial float onto the exchanges and as an average per group we see this plot below:

Average crypto-currency price history by year, coins above $250k market cap

If anything, average alt-coin performance is getting worse over time, though this is probably due to a lot of scams coming into the marketplace. Quite clearly 2014 with 95 coins on offer was the year of the ICOs.

Now $250,000 market cap is a really small figure to achieve for a coin so we might want to filter these coins to the big leagues. The plot below sets the bar at $10m market cap and the picture improves somewhat:

Average crypto-currency price history by year, coins above $10m market cap

Conclusions

I was hoping to see a trend towards better performance as new alt-coins start to forge new and legitimate marketshare beyond the vertical that bitcoin has chosen. There’s no clear picture here beyond bitcoin outperforming alt-coins from every year. While 2014 and 2015 did better than 2013 and 2012, 2016 looks abysmal.

Even applying a $10m market cap filter which should bring us beyond scam-coins, to coin platforms that should promise higher returns from their new and untouched markets, these guys (well below 10 coins introduced per year) continue to be outperformed by bitcoin.

It seems that alt-coins are best left for trading due to their volatility, but very risky as holds. This may change in the years ahead, but for now, out of 700+ coins in my database I would say less than 5 have a shot of doing something interesting. It reminds me of early stage startup investing actually.

I have a lot of brain-farts on crypto-currency. For more farting, follow me on Twitter @dangermouse117

BTC Tips: 1KrYzd8y6gnJekibZpb4ixif4nJYbaaZct

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14 Comments

  1. Richard Richard

    I live the Canvas, will you be producing more? I would bet that alt-coins are some sort of controlled opposition to make the whole thing just appear silly and not relevant enough to adopt on a large scale, like globally. I don’t think this train will stop and will probably derail quite a few stalled trains…like banks.

  2. Wes Wes

    Great article, thanks. I would like to buy your canvass, would you be prepared to sell it or produce a limited few additions ?

  3. Lkel Lkel

    Ltc is the man.

  4. chartcurious chartcurious

    What did you use to make the charts? Thanks!

  5. Jake L Jake L

    i’d be interested in seeing the same charts but comparing just bitcoin and ethereum.

  6. Which is the greenish blue altcoin, moving over the bitcoin (figure 2)?

  7. Sela Sela

    Hey, great article! I’m struggling with finding reliable data sources about blockchain statistics. Do you mind sharing how you collected the performance data?

  8. Vultus Vultus

    Is there raw data available for this? My hypothesis is that bitcoin’s greater rise in these charts is because it had a much lower level of hype at launch day; the way to test this is to pick a common start date and look at price movements from there.

  9. mmortal03 mmortal03

    “Even applying a $10m market cap filter which should bring us beyond scam-coins”

    I wouldn’t assume that.

  10. MoveCrypto MoveCrypto

    Did you ignore all the feedback on your last article about how an altcoin index only works if there is a committee, like Iconomi, which requires the altcoin to have a long-term viable plan to be included in index?

    • This misses the point of the study which is to see if passive indexes can perform well enough to beat a straight investment in Bitcoin. Index portfolios are passive, active portfolios attract much higher fees. Iconomi’s fee structure is very high and reflects active management. On Wall Street these high fees end up killing their performance to the point that passive funds that track index baskets outperform them. Obviously in this study I found that passive index tracking has a hard time beating Bitcoin. For Iconomi, they stated they would have a passive CTF fund in their whitepaper and laid down the rules for it. As far as I know, they are preselecting on criteria now which is quite different from their original whitepaper plan and they use this as a “he misses the point” rebuttal to my findings. Time will tell if their management performance can make up for the 20% fee they charge on profits.

  11. MikO MikO

    Are any of these alt-coins deflationary like Bitcoin? I would assume this is the simple reason why they all trend downwards. Of those that are deflationary, do they provide a service?

    GAME is both deflationary and provides a service, which is being brought to fruition early December 2016 with plans to integrate more into its industry. Definitely one of the few alt coins I would put my money into long term.

  12. Jon Comer Jon Comer

    It is no “statistical aberration” that GAME has been the one “outlier” in this chart. If you were to dig deep, you would learn that GAME has had an unusual amount of accumulation from buyers that are not the normal crypto traders/investors. $100ks, probably millions in fact, have been invested by individuals and companies that do not have BTC as a part of their investment portfolio. There are other factors as well, but as someone who is a altcoin trader and bitcoin holder and has known the evolution of GAME as intimately as anyone, I can tell you this graph is NOT a coincidence or aberration. In fact, these details I am sharing might shed additional light on why most all the other coins have underperformed bitcoin.

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