5 years of the ‘Top 10 Cryptos’ experiment and the lessons learned

“Index investing can be boring, but it saves you from the worst possible outcomes.”

When Redditor Joe Greene started the Top 10 Cryptos experiment in 2018, he bought $1,000 of Dash, NEM and Iota, among others, only to watch it crash to $150. But five years on, his experiment has paid off big time.

The rules: Buy $100 of each of the top 10 cryptocurrencies on Jan. 1, 2018, 2019, 2020 and 2021. Hold only. No selling. No trading. Report monthly.

Every January since 2018, Greene has reviewed a list of the top 10 cryptocurrencies by market cap from his tropical office in Bali. He puts $100 of his own money into each, tracks the performance every four months or so, and publishes the findings on his website and on Reddit.

When he began, crypto indexes were few and far between, so there wasnt an easy alternative. Having invested in stocks for years before moving into crypto, Greene predicted that chasing tokens on a hot streak was dangerous unless done consistently and this was indeed proven so by his experiment with the Top Ten Crypto Index Funds.

Bitcoin 2017

Like almost everyone else that year, Greene was mesmerized by the sudden rise of Bitcoin during the 2017 bull market. I remember looking to buy a rig to do some mining, but it turns out they were all sold out. So, I thought, Whatever, Ill just go out and buy some coins instead, he tells Magazine. A combination of the underlying technology, the financial elementsand the future direction of the asset class kept Greene in the sector. He has been blogging with the project ever since.

At the beginning, Greene was relatively new to crypto like his audience. He explains:

I came through Reddit and some online articles, and everyone was pretty much shilling sketchy returns, although there were a few diamonds in the rough.

Faced with uncertainty, Greene decided to stick with his normal investing philosophy of holding on to what he purchased and refraining from excessive trading. Outside of crypto, Im not a trader, and Im convinced that very few people are traders. Something like only 0.5% of traders are profitable over the long run, says Greene. So, yeah, I aint a trader. And I learned my lessons long ago. Greenes basic philosophy is that its safest to invest in low-cost, super diversified index funds which is Warren Buffetts advice for the majority of investors, too. But there simply wasnt anything like it at the time in late 2017. So, Greene decided to make his own.

 

 

 

 

Winner takes all

The thinking was that, like stocks, cryptocurrencies have also exhibited signs of winners take all, where over a long period of time, the winners keep winning and the losers keep losing in terms of investment gains. After all, the best performing cryptocurrencies attract all the media attention, Google searches, institutional interest, retail euphoria, etc. So, Greene theorized that for individuals who didnt know much about the crypto space, their best bet was to just stick with the top players and be consistent about doing so.

And so, from 2018 onward, Greene compiled a list of the top 10 cryptocurrencies on CoinMarketCap at the beginning of each January and tracked their performance over time.

 

 

Greene says that the best lesson he has learned during this period is the power of dollar-cost averaging purchasing an asset on a regular basis without any regard for its market price. This smooths out the volatility in the purchase price and brings it closer to the average price over the period in which it was bought.

What goes up doesnt always stay up, but the risks can be mitigated with monthly rebalancing, he said. My initial portfolio in 2018 consisted of tokens such as Dash, NEM, Iota, etc. Even though there was a bull market from 2020 to late 2021, none of the tokens I spoke of managed to recover their all-time high prices witnessed five years ago. But there were rallies thereafter, and if you stuck with rebalancing, you would have done well.

 

 

 

 

Crypto winter OG version

In fact, when Greene placed $1,000 in each of the top 10 cryptocurrencies in January 2018, his portfolio slid to be worth less than $150 just 12 months later.

However, patience is rewarded, and for someone who consistently invested $1,000 into the top 10 cryptocurrencies by market cap every January from 2018 onwards, the model portfolio would have returned a cumulative 87%. During the same period, the S&P 500 benchmark would have yielded 24%.

 

 

 

 

Greene points out that the strategy of sticking to the big winners if done consistently would have worked out in the long run. The 2019, 2020, 2021 and 2022 Top 10 crypto portfolios he tracked have returned +126%, 338%, +177% and -69% (not surprisingly), respectively, to date, essentially offsetting any poor performance made during the bear years.

 

 

 

 

Its not anything spectacular, like how Twitter shills claim you can get 10,000% in a week by putting your life savings into crypto, he says. For any kind of an index, youre never going to get the best return, but its going to protect you from the worst possible outcomes.

Greene elaborates that his method would have worked out better if the index was able to track the entire market, and not just the top crypto. Over the same period, an all-market crypto index would have yielded 224% growth, he stated.

Thats the beauty of index investing. I have a normal job and a family to take care of. Because of that, I cant spend 10 hours a day like on Twitter and Discord and trying to figure out which crypto is going to go up the most. I also suck at NFTs. So, we need an investing method for ordinary people whose lives arent devoted to crypto.

Greenes experiment and methods have attracted a lot of interest among the crypto-curious on social media. When asked about any interesting investment behavior or trading pattern he has observed among his followers over the years, Greene says that there are lots of people who view price movements with the benefit of hindsight: Its like saying, Hey, I bought Doge because it went up, you should have gotten it as well. I cant respond to that, and theyre right. But the trick is predicting that beforehand.

 

 

 

 

There have also been plenty of surprises: A lot of Bitcoin fans switched to Ethereum over the years, for starters. Then there was BNB Coin, nobody really expected that coin to become big, and I think not even Binance CEO Changpeng Zhao expected that.

On his blog, Greene also has a section dedicated to financial literacy, pointing out that retail investors should track their bills and have their finances in satisfactory condition and never risk more than they can afford to lose. His approach means he became acquainted with folks of a more conservative mindset.

 

 

 

 

Its folks that arent day trading crypto, he explains. And I tell them, Dont throw everything you have into crypto thats a bad idea.

A decade of Top 10

Greene plans to continue Top Ten Crypto Index Funds until it hits a decade or so. After all, I have a family and a full-time job commitment, which can get quite stressful at times.

 

 

 

 

But Greene warns that even though the experiments cumulative performance has been good, its important to be on the alert for severe drawdowns: Take this year: Theres now four stablecoins on the top ten list. Its a bit boring, so I would have to move things around a bit, he says, adding, But I should probably stick to what I know best. I also tried this year to get a bonus on DeFi. It was 130 bucks starting with USD Coin, which I swapped for TerraUSD, just for fun, and then I sent it to anchor on LUNA, which crashed magnificently.