Do Top 10 Altcoins get Hyped up and Then Disappear?

The Top 10 coins continue to change, but do these coins get ‘hyped up’ and then disappear into oblivion?

Credit to Dimitris on Twitter for this image and subsequent inspiration for this post.

The Inspiration Behind This Piece

I saw this image on Twitter in response to Ryan Selkis discussing how sensible the current Top 20 cryptocurrencies are. However, that image didn’t differentiate coins that are active but are out of the Top 10 and those coins that are now considered dead.

I thought this differential needed to be included as a coins worth isn’t wholly dependant on its ranking. Crypto is full of innovation with loyal communities, so a coin that was a former member of the Top 10 may still be thriving.

That is why I adapted the above image into a spreadsheet that made the separation. Coins that are in green were in the Top 10 on 28/2/2021, those in yellow are currently active, and those in red are now dead.

Adapted ‘Altcoins get hyped up and then disappear into oblivion’ graphic to reflect Top 10 coins, Active and Dead Coins.

Therefore, do ‘Altcoins get Hyped up and Then Disappear into Oblivion?

On the surface, this question is difficult to answer. The breakdown between active and inactive projects slightly leans in favour of projects that are now inactive. However, the commonality with dead coins is their length in the Top 10. The average for dead coins in the Top 10 was 9.2 weeks. In comparison, active projects had 65.2 weeks, and the current Top 10 had an average of 206.2 weeks at the top. Only Bitcoin, XRP and Ethereum have been in the Top 10 longer than the average and have yet to fall out.

Coins that had been in the Top 10 for 30 weeks or less had a 1:5 chance of remaining active. But, the majority of those inactive coins entered the Top 10 before 2016. Polkadot is the only project in the current Top 10 with 30 weeks or less, although Chainlink has 31 weeks.

In contrast, coins that have been in the Top 10 for 30 weeks or longer have a significantly higher chance of not being dead. Feathercoin and Novacoin are the only two coins that have been in the Top 10 for longer than 30 weeks but have failed to remain active.

Therefore, longevity in the Top 10 contributes significantly to the long-term success of the coin. Additionally, coins that had a week in the Top 10 include Bitconnect, Storeum and TAGZ5, all of which were scams. That indicates coins that have just entered the Top 10 suddenly without a proven track record should be avoided.

With these findings, I wanted to explore whether it was worth creating a bot that automatically buys Top 10 coins at the end of each week, similar to a DIY index. That is why I created two hypothetical scenarios to determine how that index would perform.

Hypothetical 1: Investing $100 per Top 10 Coin Upon Entry and Holding

This first hypothetical would replicate what the trading bot would be. It would first invest $100 in every coin in the current Top 10, then subsequently invest an additional $100 with every entry at the end of the week. Coins that fall out of the Top 10 and then re-enter will be an additional investment resulting in some coins having multiple investments in them.

The goal of this is two-fold. The first is to determine whether buying and holding coins that enter the Top 10 would make for a good investment answering the original question laid out by Dimitris. Secondly, I was curious about the changes in the Top 10 from 2013 to now. This hypothetical scenario would allow me to explore and learn about the historic performance of these coins.

Hypothetical 2: Investing the Same Amount as Hypothetical 1, but Only Dollar-Cost Averaging BTC

This second hypothetical would use each yearly investment from the first hypothetical divided over 12 months to dollar-cost average (DCA) into BTC at the end of each month. That will allow for a benchmark for the first hypothetical to challenge as BTC has been the market leader in cryptocurrencies.

I was inspired to do this as my previous post analysed what DCA BTC between the peaks of 2017 and 2021 would return for an investor. If a DCA strategy was used from 2013, incremental investments could return substantial gains. If a Top 10 index is worth creating, then it should make similar if not higher returns than BTC over the same period.

Hypothesis

Before creating the spreadsheets and looking at the data, I decided to write down a hypothesis that I could reflect on after completing these two hypothetical scenarios.

  • The second hypothetical would outperform the first hypothetical. I base this on the lack of long-term success of early projects (2013–2015). Therefore, their ability to compound into financial gains is limited.
  • That there would be some coins that are no longer in the Top 10 with significant gains, making their investment worthwhile.
  • Performance of the coins would broadly follow their longevity in the Top 10. The longer they remained at the top, the better their returns.
  • There will be a small selection of coins that constantly shift in and out of the Top 10 but would make good returns.
  • Finally, the first hypothetical would outperform the stock market (Tesla, S&P 500, FTSE 100 and the NASDAQ 100). That would confirm that the creation of a DIY Top 10 index would be worthwhile as a way to gain exposure to cryptocurrencies.

The Layout for the Spreadsheet

The following layout will be applied for all the years (2013–2021), and I think it has allowed for a clear format to understand the changes within the DIY index. With this first hypothetical scenario, I haven’t adjusted for coins being bought with BTC as required in the earlier years, nor have I included added costs such as taxes and fees.

On the right-hand side, I have listed all the coins that have been in the Top 10 that year. The colour indicates whether they are still in the Top 10 by Feb 2021, active or dead. I have also included the entry date into the Top 10, price in USD on entry, the coins purchased with $100, and the date that the coin has left the Top 10 if it has. That format gets repeated as coins reenter. The years 2014–2021 will have the new dates entered into the Top 10 highlighted in green which serves two purposes: 1) Able to demonstrate changes in the Top 10 and 2) Makes tallying each year’s transactions easier.

Under the Top 10, I have added the total transactions, multiplied by $100, then divided by 12 to DCA into BTC with the subsequent transactions made throughout the month displayed.

2013

Changes in the Top 10 during 2013 with subsequent investments. Below is the DCA BTC with 2013 investment.

What I found interesting about the 2013 sheet is how many coins entered and reentered the Top 10. Aside from Bitcoin, Litecoin, Peercoin, Namecoin and XRP, the remaining coins constantly shifted as their markets caps were significantly lower than the five listed. At the time, the cryptocurrency market was a fraction of what it is now. After all, Bitcoin was only $134.21! However, as the sea of red indicates, the majority of these projects failed to last the test of time. Despite that, in 2013, these projects looked like geat prospects, as a small investment of $100 could have resulted in being a fantastic investment. Similar to venture capital, 1–5% will be unicorns, 10–20% will be okay, and the remainder will fail, but the upside of catching a winner overrides the losses made on the unsuccessful. That is why I was interested in this idea of a DIY Top 10 index.

As someone new to cryptocurrency, I hadn’t heard of many of these coins and that caused several distractions while I was reading into them. I can only imagine how exciting it was like during 2013 with all this innovation and change in the Top 10.

2014

Changes in the Top 10 during 2014 with subsequent investments. Below is the DCA BTC with 2014 investment.

When comparing 2013 against 2014, many of the projects that emerged in the former were replaced by the latter. Additionally, 2014 also introduced active projects that remained relevant over the cycles, including one Top 10 coin. Similar to 2013, where coins constantly changed, 2014 was more active, when 2013 is adjusted to reflect the 10 initial transactions, with more than half of these transactions being introductions of new coins.

When comparing to later years, 2014 stands out due to the number of changes and introductions of new coins. When the Top 10 becomes more defined, these changes decline, suggesting a greater stabilisation of the Top 10. However, by investing early in these early leaders in the market, an event he active projects would have resulted in gains that would be impressive for any investor.

2015

Changes in the Top 10 during 2015 with subsequent investments. Below is the DCA BTC with 2015 investment.

In 2015, unlike the previous two years, the Top 10 became more stable with its selection as the number of introductions halved from 2014 despite a similar number of transactions. Additionally, coins that entered the Top 10 during 2015 saw repeated entries by coins from previous years. That is attributed to two factors: The first is that prices, as reflected in the price of BTC or MaidSafeCoin, soared during 2015, consequently with these price rises, market caps would continue to change, causing coins to either move into the Top 10 or drop out. Then secondly, the makeup of the 2015 Top 10 intake in comparison to 2013 and 2014 is comprised of more active coins than dead. Of this selection, 28% are still in the Top 10, with 33% being active projects. In contrast, 2014 only had 36% of the coins included as active or in the current Top 10, with this number for 2013 being 22%.

Similar to 2013 and 2014, 2015 saw the introduction of a current Top 10 Coin, Ethereum. The importance of this is that the current price of Ethereum is significantly higher than what it was back in 2015 during its introduction. What is fascinating with this is that in this hypothetical scenario, I wanted to see what coins would be captured at a discounted rate upon their entry in the Top 10, and that is precisely what Etheruem was.

Finally, when analysing 2015, both Peercoin and MaidSafeCoin stand out as they consistently entered and dropped out fo the Top 10, resulting in repeated investments. For example, Peercoin is a dead project, and these continuous investments would result in an almost loss of funds by 2021. However, MaidSafeCoin, although not in the Top 10 by 2021, is still active. Therefore, it’s potential gains in 2021 could be seen as a great investment. Although the spreadsheet doesn’t stretch out to reflect the number of entries for both coins, Peercoin made 4 entries into the Top 10 and remained in the Top 10 beyond 2015. MaidSafeCoin, however, had 8 entries in the Top 10 in 2015 but also remained in the Top 10 beyond 2015.

2016

Changes in the Top 10 during 2016 with subsequent investments. Below is the DCA BTC with 2016 investment.

Where 2015 saw a stabilisation of entries into the Top 10, 2016 saw a doubling of introductions and an increase of changes. Prices were once again on the rise, and that was the primary cause of these changes. Additionally, the number of coins in the market saw a considerable increase. No longer, as was that case in 2013, was the market limited to a small selection of coins as the market had rapidly expanded to over 1000 available coins. However, just under half of these new introductions into the Top 10 are now dead coins.

Once again, MaidSafeCoin continued to enter and drop out of the Top 10 throughout 2016, resulting in over 10 investments by this point. That was the most surprising element of the spreadsheet by this point. I expected that some coins would enter and renter dependant on progress and changing valuations, but to enter as many times as MaidSafeCoin was astounding!

2017

Changes in the Top 10 during 2017 with subsequent investments. Below is the DCA BTC with 2017 investment.

A common feature throughout these spreadsheets is that the number of investments made per year correlates to price changes. The higher the prices, the more transactions. In 2017, the cryptocurrency market entered a remarkable bull run that saw the market exploded, and with that, market valuations. That is why 2017 saw the highest volume of transactions, both before and after 2017.

In 2017 the market had grown, but with that, market valuations were rapidly increasing. Monero is the perfect example to illustrate that during its multiple reentries during 2017. Initially being valued at $0.875 per coin in 2016, then for each new introduction in 2017, Monero subsequently rose to $2.54, $42.79, then $130.67. Each entrance saw substantial growth in the coin and becomes a great example of how the market grew in 2017. For introductions into the Top 10, the lack of historical data resulted in overblown valuations for coins that mirrored market conditions without underlying value.

In 2017, multiple entrants into the Top 10 were initial coin offerings (ICOs): IOTA, EOS and Cardano. These coins raised money by offering pre-mined coins to the market through a token sale as a fundraising mechanism. However, ICOs became problematic as the fundraising method was similar to selling unlicensed securities to investors as ICO protocols often without a product offered a vision but had no liability with failing to produce their promises. In the Top 10, these ICOs are still active, but many did fail.

2018

Changes in the Top 10 during 2018 with subsequent investments. Below is the DCA BTC with 2018 investment.

Where 2017 saw the peak in transactions, with market prices soaring, 2018 reflects the subsequent end of the bull market with a decline in valuations and transactions. With this decline in the market, projects that previously entered the Top 10 through ‘hype’ had been removed, as fundamentals became more important. That is why 2018 is the first year where the Top 10 coins are all active or current Top 10 coins. When the bubble burst, money returns into projects that have a record of success. Although many of the coins listed in this Top 10 are considered ‘shitcoins’ by various cryptocurrency communities due to their dislike of forks, BTC against BCH and BSV for example.

2019

Changes in the Top 10 during 2019 with subsequent investments. Below is the DCA BTC with 2019 investment.

With 2018 illustrating the start of the bear market, 2019 became the bear market. Prices significantly dropped from the 2017 peaks. When reflecting on the price changes of Monero that entered the Top 10 at $368.97, during 2018, the price plummeted down to $71.78. That trend continued for other coins that had multiple entries between 2017–2019.

That highlighted a difficulty for the DIY index of the Top 10. When coins are discounted during the market lows, it creates fantastic buying opportunities. However, when the market is booming with prices surging, coins that reenter with an increasing price, will result in substantial short-term losses. If, for example, MaidSafeCoin had repeated entries during 2017 as it did in 2015 and 2016, these repeated investments would have destroyed any short-term financial gains for the investor. That could occur with any coin, unexpectedly for this type of index.

2020

Changes in the Top 10 during 2020 with subsequent investments. Below is the DCA BTC with 2020 investment.

By 2020, the market reversed, turning into the start of the bull market. That can demonstrate that an increase in transactions during the year correlates to the growth of the industry.

Despite the horrific drop in prices in early March due to Covid, the market rapidly recovered and saw monumental growth. This period also saw the introduction of more coins into the Top 10, rather than the internal competition between a small selection of coins as was the case in 2018 and 2019.

However, with the market soaring, 2020 was also the first year since 2017 that had dead coins entering the Top 10. Both of these coins, Storeum and TAGZ5, were scams. That once again reiterated the importance of longevity within the index. Therefore, if I were to construct this index, the hypothesis needs to be adjusted to withhold investment for coins that have been in the Top 10 for less than 2 weeks. By hedging against this risk by forcing a 2-week requirement in the Top 10, it avoids the coins that are constantly entering and dropping out and scams. That should ultimately create greater returns in this hypothetical index.

2021

Changes in the Top 10 during 2021 with subsequent investments. Below is the DCA BTC with 2021 investment.

While 2021 has the inclusion of two months, there is already significant movement in the Top 10, including two introductions. If the trend of 2021 continues, then the volume of transactions in the Top 10 should be higher than in 2020. Prices are already soaring, as demonstrated by Stellars increase in price. Therefore, I suspect that 2021 will reflect 2017, where the market boomed but then came to a sudden bust.

When reflecting on the original tweet that sparked Dimitris response, I think that the current Top 10 looks more sensible than ever. However, I don’t think that will be the case during the peak or end of 2021. But, when the cycle ends, whenever that may be, the coins in the Top 10 will look remarkably better than they did in 2018 and 2019.

What Does our end Portfolio Look Like?

Portfolio with perfromance of each coin 28/2/2021

The years 2013–2021 saw many changes at the Top 10, reflected in the end portfolio. On the left of this spreadsheet is organised by the initial entry for all the coins that joined the Top 10, the original entry date, price, investment and tokens. Between the pillars of red and green is the inclusion of new coins per year and the total amount invested to account for reentries over multiple years like MaidSafeCoin.

Structuring the spreadsheet in this format helps illustrate the changes in prices over the years. For example, when the market is either in a bull market like 2017 or a bear market in 2018 and 2019. I thought that presenting the data like this also helps demonstrate the behaviours in bull markets as I was interested to see how the early entrants in the Top 10 during 2013–2015 would perform. Despite many being highlighted in red before 2017, which means there are negative, many would become positive.

Therefore, it was interesting to see how losses could be recuperated if an index was constructed as the first hypothetical describes. Those coins that were at a loss for more than one year would have then turned a profit that could be used for other purposes. Now, that is something worth considering for a future index.

On the right of this spreadsheet, it has the current prices of all the coins in this index with their profits and losses. I was surprised to see coins like Dash and Stellar making the returns they did. Additionally, I was shocked by the end total, with only $22,200 invested over 9 years returning, $677,310.14, which is an increase of 3353%. It made the idea of this index very compelling.

Finally, this index is still very young, with a basic formula behind its construction. If tweaks are made to it, then the gains made by the index can be improved significantly. Coins like Stellar that have dropped out and then reentered the Top 10 from 2014 could result in even greater gains in the foreseeable future as DCA allowed for an accumulation of coins. That was one of the most attractive aspects of this project.

How does BTC Perform?

Combined BTC investments

However, when the portfolio is contrasted to the second hypothetical, its performance becomes less impressive. If the same amount of money was invested over a DCA strategy each year over the same period, rather than returning only $677,510.14, with BTC you’d have $1,997,347.66 in profit.

Although $677,510.14 is a fantastic return, objectively, the second strategy would have been significantly better. However, with BTC the price has continued to increase gradually, which will result in diminishing returns. With this strategy, 2013–2016 provided the bulk of the BTC, enabling the gains in 2021 and has declined considerably since then. With exposure to just BTC, as opposed to a plethora with the index, gradually over time the index may become the better performing strategy.

Furthermore, many of the coins in the Top 10 index have yet to reach their potential that may result in significant gains. For example, Ethereum is shifting to ETH 2.0 and implement EIP-1559 which will significantly improve scaling the network and dramatically reduce fees. The potential for this is that Ethereum could see rapid growth where BTC has failed. h

But, in the end, as Matt Odell says: stay humble and stack sats. Holding BTC for the long-term has been a great investment. But with the development of other networks, BTC, although the market leader, is not the only viable project. There will be interoperability in the future with separate blockchains offering unique solutions. To ignore that would be ignorant. The coins of 2013 aren’t in the same league as the ones in 2021.

Returning to the Hypothesis

The second hypothetical would outperform the first hypothetical. I base this on the lack of long-term success of early projects (2013–2015). Therefore, their ability to compound into financial gains is limited.

That there would be some coins that are no longer in the Top 10 with significant gains, making their investment worthwhile.

Performance of the coins would broadly follow their longevity in the Top 10. The longer they remained at the top, the better their returns.

There will be a small selection of coins that constantly shift in and out of the Top 10 but would make good returns.

Finally, the first hypothetical would outperform the stock market (Tesla, S&P 500, FTSE 100 and the NASDAQ 100). That would confirm that the creation of a DIY Top 10 index would be worthwhile as a way to gain exposure to cryptocurrencies.

With my original hypothesis, I was right with all my points. However, I was still surprised by the outcome.

Although I predicted that the second hypothetical would outperform the first, I didn’t expect a difference of 300%. When reflecting on this point, I don’t know if I expected more or less. However, the difference between the two scenarios still took me by surprise. I think my surprise comes more from the performance of the second hypothetical rather than the first. I didn’t expect that the second strategy would do so well. Then again, the early accumulation of BTC had highly influenced the long term performance.

With the coins that were no longer in the Top 10 but made significant gains, I was also surprised with what coins performed well. I expected that DOGE and Monero would be in the selection due to how DOGE pumps on almost every Elon Musk tweet, and Monero has been a solid project through the years. I didn’t expect Dash or NEM and especially not MaidSafeCoin. It was interesting to look into these projects and still see an active Reddit or telegram group. With MaidSafeCoin, the constant investments concerned me as I worried that these investments would result in losses or a near break-even, skewing the data. However, the returns were still significant!

The third and fourth point didn’t surprise me. With the original graphic, it became apparent that there was an obvious correlation with both of these points.

Finally, the creation of a Top 10 Index would be a good idea to pursue. It would be a small portion of my portfolio, but it would require some changes to its design. For example, there will need to ensure that each coin included will have been in the Top 10 for longer than 2 weeks. These changes will require some time and effort to consider and will be a future project.

Final Remarks

I really enjoyed doing this project, and it made me realise the importance of being able to use a web scraper. I entered all this data manually, and that wasn’t much fun! I particularly enjoyed looking at the end portfolio as you could see the swings in the market and how coins performed over the period. For example, watching coins that were going to die slowly decline over the years.

The Top 10 does look significantly better than it did in previous years, and I think this will be a project that I will update each year to test my hypothesis. I will start working on creating a bot that does invest a small number of dollars into each Top 10 coin, but I will start it at the end of this market cycle. Why start buying high?

Coins that have previously entered the Top 10 have been hyped up and then subsequently disappeared. However, at the start of this data set, the industry was significantly smaller than today. Therefore, there will be new projects entering into the Top 10, full of potential that will survive over the long-term. I don’t know what they will be or when they enter, but that’s the point of this DIY index.

If you have any questions, please comment below this post or connect with me on LinkedIn at https://www.linkedin.com/in/wilsonedwardc/

Legal Disclaimer: I am not a financial advisor. The advice here given is not financial advice even though my excitement might make it look like such.

For The Curious Mind

Once again, I don’t have much to add in this part. This article was all my own research and I haven’t been infleunced by others than those already refrenced. I relaly like indexs, espcially those with a longer-term outlook, which is why I was motiavted to do this piece.

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