Why I bought the entire Cryptocurrency market
The Background
Like millions of others, I was introduced to cryptocurrency during late 2017. Since I was already investing in traditional financial markets, my first instinct was to mirror my investment strategy within the realm of crypto. It seemed like it should be simple enough at the time; all I needed to do was make sure that I acquired a stake in every potential winner in this market as I did with my other index funds.
I quickly realized that my optimism about how easy this would be was completely baseless — total market ownership was actually next to impossible. There may have been tons of top 10, top 20 and even top 100 cryptocurrency indexes, but by the time I got started there were already thousands of coins on the market. The number of coins was growing every day, and I didn’t want to miss out on a single one that had potential.
But why would I want to own every currency on the market? We all know that the majority of alt-coins are highly unstable and some are outright scams, but in a huge portfolio of them, the gains of the winners can write off any losses. The majority of coins in the top 100, both now and at the height of 2017, started out trading for fractions of a cent per coin with total market caps in the tens of thousands and then grew to be worth hundreds of millions.
My Strategy
It made sense to me to have at least some small share of ownership in every single cryptocurrency, regardless of whether or not I expected it to succeed. Since cryptocurrency was already the “unstable” portion of my portfolio, I was okay with the level of risk I was exposing myself to.
My logic was pretty simple. If just one of the least valuable coins jumped to the top 100, I could write off any losses and then some. There were already tons of examples of this happening when I started.
Since I had no idea which of these coins were likely to succeed, I had no choice but to do the unthinkable. I set out to buy 1000 cryptocurrencies.
The Problem
But how was I going to achieve this goal? There was no one stop shop that offers every crypto on it. The average crypto exchange has less than 100 unique coins and even if there was a one stop shop, it is not wise to have all of your eggs in one basket in terms of exchanges.
I signed up for over a dozen of them, transferred crypto onto each one of them, converted to multiple base currencies on each exchange, and painstakingly purchased Every. Single. Crypto. I didn’t want to invest a ton into every coin, but trying to make small purchases (less than $5 each) only made things more complicated because of minimum trade amounts.
For a solid 2 weeks straight, I had 50 tabs open, including links to coin market cap, all the exchanges I was logged in to, crypto value calculators, and spreadsheets to help me keep track of everything that I already owned.
When it was all said and done, my takeaway was pretty clear.
A major reason crypto investors only own a limited number of coins is not one of risk, but lack of exposure.
The gains from diversifying into as many coins as possible are truly mind boggling and I couldn’t believe it when I started to make some calculations against the historical data. If you had 1 year foreknowledge about what the total market value of cryptocurrency would be in December of 2017 but you didn’t know which coins to invest in, your best option would have been to simply buy them all.
The Data
In mid December of 2016, exactly one year before BTC hit its meteoric $19,000 value, there were around 500 investable cryptocurrencies which could actually be purchased on exchanges. Had you blindly invested in all of them, this is what your result would have been:
Top 500 coins
Average Coin Price Percent Change between Dec 2016 — Dec 2017: 14,868.51%
Average Market Cap Percent Change between Dec 2016 — Dec 2017: 15,681.12%
Value of $500 investment spread evenly into each coin: $74,345.00 (148x gain)
Now lets compare this to a less diversified portfolio:
Top 25 coins
Average Coin Price Percent Change between Dec 2016 — Dec 2017: 5,086%
Average Market Cap Percent Change between Dec 2016 — Dec 2017: 6,566%
Value of $500 investment invested evenly into each coin: $25,435 (50x gain)
BTC Only:
Average Coin Price Percent Change between Dec 2016 — Dec 2017: 2,466%
Average Market Cap Percent Change between Dec 2016 — Dec 2017: 2,573%
Value of $500 investment: $12,335 (25x gain)
What about excluding all of the large caps?
Bottom 400 coins (numbers 100–500):
Average Coin Price Percent Change between Dec 2016 — Dec 2017: 17,419%
Average Market Cap Percent Change between Dec 2016 — Dec 2017: 18,009%
Value of $500 investment invested evenly into each coin: $87,100 (174x gain)
The full data set for 2016 to 2017 bull run calculations can be found here
Keep in mind that these hypothetical portfolios take into account currency dilution, reverse splits, and coins which died and went completely to $0. Yet still, the net result suggests that the more your portfolio consisted of microcaps, the better it did.
Now, you may rightly point out that this data set is looking specifically at the best bull run in crypto history. But what happens with this type of portfolio during a bear market? I originally thought that it was only going to perform well assuming that a bull run was on the horizon and I was willing to lose all of my investment in the case that the overall market collapsed.
However, to my amazement, the data indicates that just like in conventional financial markets, deep exposure has continued benefits even when the market dives.
Diversification led to reduced losses in the bear market.
At the very worst time to buy (December of 2017), there were roughly 1000 unique purchasable assets. This is how your portfolio would have fared a year later with different levels exposure:
The full data set for 2017 to 2018 bear market calculations can be found here
In full disclosure, the data that we’ve included shows the results for one bull market and one bear market. Hindsight is 2020 and past performance is not indicative of future results.
But the trends were clear enough that I could not ignore them. Taking advantage of this information was functionally impossible, which may be the reason why it has been ignored.
Even if you are an experienced crypto investor, the process of gaining mass exposure to the cryptocurrency market can still take weeks.
The complications of trading directly on exchanges are there even if you have no intention of creating a direct index. If you own coins on many exchanges, managing your portfolio from a holistic perspective is impossible. Re-balancing a portfolio of even 20 coins, owned fully on one exchange can be an operational nightmare. Exiting the market with a sizable portfolio can be similarly dreadful. How do you sell off disparate assets across exchanges in a holistic way to a more stable store of value?
While there are many platforms that allow you to integrate all your exchanges into one place, there are few that focus on eliminating the complications of crypto trading at scale.
The Solution
Over the last year, my central goal has been to eliminate these problems and bring to life a formerly impossible way of investing in this space. I created BulkChain, the world’s first integrated bulk crypto trading platform.
So what does BulkChain do?
BulkChain allows you to buy and sell en masse for over a thousand unique cryptocurrencies with the exchanges that you are already trading on, all in one order.
You can customize these bulk orders, making it easy to filter out dead coins, sort and aggregate trading pairs by value changes, market created dates, volume, market cap, and much more. Then, when you are ready to exit the market, it is very simple to choose the base coin that you want to sell to, for instance a stable coin like USDT, and dump a portion (or all) of your portfolio, in one sell order.
BulkChain further eliminates order set up for both buying and selling by automatically converting between currencies to fund your orders. For instance, if you are looking to buy MBRS on Cryptopia, and you can only buy it with BTC, yet you only have LTC — BulkChain will automatically convert that LTC into BTC and then buy the MBRS.
On BulkChain, base currencies are treated as reserve currencies — if you want to buy an alt-coin and know you have a certain amount of total base currency on that exchange — you shouldn’t need to worry about where the specific funds are coming from to buy it.
BulkChain allows for holistic portfolio viewing, aggregating, and management. By treating your portfolio as one holistic entity, you can make decisions based upon what’s best for it, and not be bound by the limitations of an individual exchange.
I’ve created a survey to gather data to help build a better product, and would love some feedback!
The more feedback you give, the better this product will be, and the easier it will be for people to gain access to the crypto market.
You can also sign up on our site for early access.
**Note: I am not a financial adviser and nothing above is intended to be financial advice**
