Beyond hardcore Bitcoin maximalists who view BTC as the sole valuable cryptocurrency, we have the ‘No BTC for me!’ crowd who advocate for focusing solely on altcoins. In this article, I’ll delve into the reasons why anti-BTC individuals choose to exclude it from their portfolios.
Use-cases
Many of the cryptocurrencies that emerged later, notably Ethereum but also numerous smaller coins and tokens dubbed as “Altcoins,” boast considerably broader functionalities and thus additional applications. While Bitcoin primarily serves as a store and medium of value, modern blockchains offer programmable features. Known as “smart contracts”, these functionalities enable algorithms to automatically trigger transactions within the blockchain based on predefined conditions. As such, groundbreaking innovations in cryptocurrency application are more likely to stem from alternative coins. Notably, many of these coins offer attractive features such as staking for ongoing returns, a functionality not inherent in Bitcoin due to its design, rendering it a “non-productive” asset.
However, Stacks and Trust machines have made Bitcoin programmable. Stacks is a layer 2 blockchain technology network on top of Bitcoin which creates a sidechain of Bitocin. Moreover, Bitcoin ordinals allows NFTs to be created directly on the Bitcoin blockchain.
Risk-Reward Profile
While Bitcoin already exhibits extreme volatility compared to traditional securities markets, many smaller coins are characterized by even more significant price fluctuations, thus offering higher potential returns. Diversifying across multiple coins helps mitigate risk. This strategy ensures that unusual fluctuations in the value of a single coin have a moderated impact on the overall fund’s performance. However, this diversification strategy only holds true if coins do not uniformly follow the same trend simultaneously, a scenario that has historically occurred. Moreover, every future Bitocin-Halving will make it more bearish for the investors. The last Bitcoin halving happened 3 days ago. Production of new BTCs & mining reward halves every four years, after Every 210,000 blocks.
Performance
As the oldest cryptocurrency, Bitcoin presents practical limitations such as the slow generation of new blocks, occurring only every 10 minutes. Such a technological foundation cannot support an efficient electronic peer-to-peer cash system. Despite efforts to enhance scalability, Bitcoin’s blockchain remains largely unchanged. In contrast, other blockchains facilitate near-instantaneous processing of nearly unlimited transactions.
Nevertheless, in Segregated Witness update of Bitcoin, witness information will be separated from transaction data and stored in a separate structure on the blockchain. This change increased Bitcoin’s Block Size and made it possible for users to inscribe image and video data in the witness script. Bitcoin Lightning Network which helps Bitcoin to operate as a layer 2 blockchain technology ties to solve scalability and transaction cost issues of Bitcoin.
No Hard Forks: No Innovation
A Bitcoin hard fork is a protocol change that creates a new set of rules for the computers that make up the blockchain network. If a hard fork is implemented without the complete agreement of other network participants, it can cause the cryptocurrency network to split into two.
Many Bitcoin Forks exists out there; However, they all have different communities, different node runners, different miners and different native coins. They only share the bitcoin protocol template, but have changed the protocol rules (for example: Increased Block size in Bitcoin Cash). The original bitcoin blockchain does not change anymore, because the community doesn't want it to be changed!
There are ideas and concepts suggesting that Bitcoin's block zk-proofs (Zero Knowledge Proof) could be used to verify and it can potentially solve the scalability issue. Nevertheless, this requires the addition of a new OP_code to the protocol, meaning a change in the consensus protocol's scripting language that would not be backward compatible (Unlike SeqWit & Taproot)
It would be great if the Bitcoin community were to take this step, but the resistance to change is so significant that the likelihood of it happening tends towards zero and it means less future innovation for Bitcoin.
Community Building
Many newer coins transcend mere value storage, integrating into protocols to offer participation or voting rights, fostering community engagement and project membership. These coins often create ecosystems where a specific coin serves as a means of exchange, incentivizing users, partners, and even employees who may be remunerated in coins. The aim is to increase the coin’s value through sophisticated price control mechanisms or adjustments to circulating token supply (tokenomics), benefiting all stakeholders with project success.
Sustainability
From a sustainability perspective, other coins surpass Bitcoin. Bitcoin’s security relies on energy-intensive mining, whereas alternative coins like those using the “Proof of Stake” method require significantly less energy for transaction confirmation. Carbon footprint of mining operations is too high. Bitcoin Lightning Network, Off-chain transactions and cloud mining would offer some potential solutions for these issues.
Market Capitalization
Investors have access to various cost-effective options and financial products like Bitcoin ETPs or ETFs for exposure to Bitcoin’s development. However, covering other cryptocurrencies in portfolio would not be that easy and will probably offer a better chance of earning more profit due to low market capitalization. Bitcoin boasts the highest market capitalization among cryptocurrencies. Conversely, Altcoins, with their lower market capitalization, are prone to more substantial price increases due to less liquidity needed to move prices. This makes low market capitalization coins attractive to investors seeking rapid and robust price movements.
Developer Community
Alternative blockchains harbor significantly larger developer communities than Bitcoin. Investing in Altcoins offers advantages, as a broader developer base fosters innovation and quicker adaptation to new technologies and market demands. Moreover, many Altcoins feature advanced technology and improved scalability.
Conclusion
I personally have Bitcoin in my portfolio, but I’m not a Bitcoin maximalist. One cannot ignore the significant advantages of Altcoins, and we can’t overlook Bitcoin as the largest cryptocurrency in terms of market cap and the pioneer of its kind. I believe that maintaining a diverse portfolio is key to building a prosperous crypto portfolio. Don’t forget to conduct thorough research before delving into the Bitcoin rabbit hole or investing in other tokens.
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