BTC, ETH & SOL vs. The Rest
Same, but different.
Ask anyone about crypto and it’s likely that they will start talking about Ethereum (ETH), Bitcoin (BTC) and Solana (SOL) and for a good reason. These are currently without a doubt the most well-known and established digital assets. As investing in crypto assets remains highly speculative, investing in BTC, ETH and SOL is considered to be the least risky option.
Nowadays, there are thousands of other coins and tokens. In general, the higher the market capitalization and the larger the user base, the less risky a digital asset is considered. Next to that, other characteristics that usually correlate highly with those two elements are high liquidity of the asset, age of the project and the number of developers working on it directly or indirectly on its ecosystem.
Given that BTC, ETH and SOL score significantly higher, sometimes orders of magnitude higher, on almost all of these characteristics, we consider them to be asset classes of their own.
BTC, ETH & SOL share some characteristics that set them apart from other cryptocurrencies. However, BTC is viewed quite differently than ETH and SOL by the crypto market.
BTC is considered digital gold, a digital store of value. Like gold, Bitcoin is seen as a hedge against monetary debasement and economic uncertainty. It's a payment network and decentralized asset that can be used to protect against the potential devaluation of fiat currencies. In times of economic instability or geopolitical uncertainty, Bitcoin is sometimes seen as a "flight to safety" asset. This means that investors may turn to Bitcoin as a way to protect their wealth from the risks associated with traditional financial systems.
ETH on the other hand, is highly regarded for its vibrant developer community and culture of innovation. It is often seen as the foundation for the internet of value due to its ability to enable decentralized applications (dApps) and smart contracts. These smart contracts allow for the creation of self-executing agreements with predefined rules and conditions. This programmable nature makes it possible to create and manage digital assets and programmable tokens, leading to the rise of tokenized ecosystems: programmable money. Ethereum is sometimes also referred to as a world supercomputer due to its ability to execute decentralized computations across a network of nodes. It enables developers to deploy and run dApps that harness the computing power of the network. This allows for decentralized storage, decentralized finance, gaming, and other distributed computing use cases. We call these fundamental blockchain layers on which the ecosystem can grow Layer 1 blockchains (L1).
SOL has quickly risen in significance, becoming the third most important blockchain and the second largest Layer 1 (L1). Like ETH, SOL supports decentralized applications (dApps) and smart contracts, but it takes a different approach to the growth of the blockchain ecosystem. While ETH relies on Layer 2 chains (L2) built on top of its base layer for scalability, SOL follows a "monolithic" approach, where all activity and innovation are expected to happen directly on its own chain, without side chains or L2 solutions. As the largest blockchain following this model, combined with its size as the second-largest L1, SOL stands out as a leading crypto asset.
How the market views BTC, ETH and SOL
Why BTC, ETH & SOL are of a different order
There are a number of characteristics that apply to BTC, ETH and SOL that make them different from other digital assets:
First-mover advantage. Bitcoin was the first decentralized cryptocurrency and blockchain network, Ethereum was the first to significantly implement smart contract capability and Solana was the first significant proponent of the monolithic thesis. They have a significant first-mover advantage due to their early market launch, which has helped them become well-known and established initiatives in the cryptocurrency industry.
Maturity. Bitcoin’s first block was produced in 2009, while Ethereum was launched in 2015 and Solana in 2020. Both BTC, ETH and SOL have gone through a number of market cycles since they were first created. All this time their user base has been growing, as has their funding and resources to sustain development and adoption.
Network effects. Both BTC, ETH and SOL enjoy strong network effects, meaning that as more users join the network, the value of the network increases. This creates a self-reinforcing cycle that makes it difficult for other blockchain projects to compete.
Dominance. BTC, ETH and SOL together currently dominate the cryptocurrency market. Combined they represent about 55% to 80% of the total market at any time. This dominance provides a level of stability and reduces the risk of significant price fluctuations.
Trading volume and liquidity. Both BTC, ETH and SOL have high trading volumes, which means that they are highly liquid assets. This makes it easier to buy and sell these cryptocurrencies quickly, which is important for investors who want to manage their risk.
As mentioned before, we consider BTC, ETH and SOL to be of a different category than all other digital assets. This is why we treat them separately when it comes to portfolio strategy. While not everyone might agree with this thesis, we deem it valuable to give BTC, ETH and SOL their own ‘place’ in a long-term portfolio due to their unique combination of characteristics and risk profile.
Building a long-term crypto portfolio is a delicate activity in which both potential risk and reward should be taken into account. This is the reason why we develop specific products for these two assets like Ace BTC, and why we don’t include BTC, ETH and SOL in alt-oriented products like our Chaindicator.