Diminishing returns: Is Bitcoin underperforming compared with altcoins?

The first half of 2021 in the crypto markets brought many comparisons to 2017. Bitcoin (BTC) was on a tear to its all-time high, the new frontier of decentralized finance emerged, and nonfungible tokens were gaining myriad celebrity endorsements. But after the initial months of euphoria and a subsequent sell-off, BTC’s performance has been far more lackluster. The recent market sell-off resulting from the Evergrande crisis has compounded fears. However, it can’t be ignored that many altcoins, particularly platform tokens, have undergone impressive runs and, in some cases, even bucked broader market trends. With hopes still high that another bull run is likely during this halving cycle, should BTC holders be worried that the flagship asset is underperforming? 

2021 by the numbers

Between January and reaching its all-time high (ATH) of nearly $65,000 in April, BTC posted gains of 113%. Based on current prices, the year-to-date (YTD) gains are around 45%. By comparison, Ether (ETH) gained 497% between January and its ATH in May, while its year-to-date rose over 300% despite taking a recent battering. However, even ETH’s impressive gains are nothing compared to rival platform tokens. Cardano (ADA) has posted a staggering YTD increase above 1,000% while barely yet supporting any real activity. Solana’s SOL has even dwarfed that figure by rising over 8,000% since January. This comes after dropping from its all-time high above $200. Honorable mentions go to Polygon (MATIC), Avalanche (AVAX) and Terra (LUNA), all of which have undergone impressive rallies in 2021. Stephen Gregory, CEO of, told Cointelegraph:

Why are altcoins outperforming BTC? 

On the face of it, the numbers do indeed seem to indicate that BTC is underperforming compared to other coins. One factor that could explain this is the law of diminishing returns. BTC is the oldest asset and twice the age of Ether. Although Bitcoin has delivered eye-popping returns during its lifetime — making billionaires out of early adopters — is it possible that the flagship asset can continue to deliver three- or four-figure returns as it ages? Given that Bitcoin’s entire economic model is based around the principle of diminishing returns, with block rewards halving every four years or so, it seems plausible. Moreover, as Cointelegraph has previously reported, as more investors and institutions pile in, Bitcoin has begun to mirror other assets. We can note this effect in the dampening of Bitcoin’s volatility over time. Arguably, the only reason that markets continue to grow is that investors continually seek out new assets of value. Therefore, while BTC appears to be delivering lower returns, it shouldn’t surprise anyone that investors are interested in more volatile assets to profit from price movements. But that leads to other questions: Is there a risk of creating a self-fulfilling negative cycle from BTC? As investors look to other assets to earn large gains, will BTC inevitably become less attractive? Or, if we dare to imagine it, does the current appetite for platform tokens indicate that investors’ sentiment toward Bitcoin is gravitating to the “no intrinsic value” argument? After all, stronger fundamentals and potential for adoption is perhaps the one big selling point that platform tokens have over Bitcoin. Micha Benoliel, co-founder and CEO of decentralized Internet-of-Things network Nodle, believes that platform tokens have a bright future ahead, but perhaps not at the expense of BTC. He told Cointelegraph:

Is $100,000 Bitcoin still realistic?

From another angle, even if Bitcoin returns are diminishing compared to their historical highs, gains continue to outstrip other assets, such as stocks and gold, by far. At the current rate of diminishment, BTC will continue to deliver superior performance for quite some time to come. As such, it seems unlikely that an exodus is imminent. Daniele Bernardi, CEO of investing firm Diaman Group, told Cointelegraph:As far as the bull trajectory goes, it’s also worth noting that in 2017, Bitcoin gained 1,900% between January and December. However, until now in 2021, it’s only up around 450%. If prices do follow the same pattern, that will put us on track for a year-end BTC price of around $138,000. That estimate is eerily close to the $135,000 year-end price predicted by the stock-to-flow (S2F) model, which continues to be the most accurate forecast of Bitcoin prices. Indeed, August’s BTC closing price is, give or take, exactly as predicted by S2F creator PlanB back in June, and September’s could be on track to follow suit. 

Bitcoin stands firm

The numbers illustrate that BTC’s returns are indeed diminishing over time across consecutive bull cycles. But this shouldn’t be surprising to anyone, considering Bitcoin’s economic model. Michaël van de Poppe, Cointelegraph contributor and full-time trader, agrees, telling Cointelegraph: However, gradually decreasing returns should not detract from the fact that Bitcoin is, by any measure, delivering a healthy performance in line with even the most bullish forecasts. According to Igneus Terrenus, head of communications at Bybit, BTC is still by far the go-to coin for newcomers — institutions or individuals — entering the space. He told Cointelegraph:It’s also impossible to say whether any of the recent platform token rallies would have happened if BTC had been languishing in long-term bear territory, as money tends to flow down from BTC. What’s more, the models show that there’s still every reason to believe in a year-end BTC price above six figures.’s Gregory agreed despite the increasing demand for platform tokens. He told Cointelegraph, “BTC is outperforming the market but is currently being held back by macro market trends and events on Wall Street. However, historically, Q4 has been the strongest for BTC, and it is likely history repeats itself before the end of 2021.”Nevertheless, while BTC is in no danger of losing its status as crypto’s flagship asset, soaring altcoins undeniably offer bigger opportunities right now for those who believe they can time the markets.

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