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Bitwise's '10-Crypto' Fund Became a Bitcoin Fund in Disguise — Here's What Went Wrong

(53 days ago) · 1 source · Summarized by CryptoBipto

Bitwise launched a diversified fund holding 10 different cryptocurrencies, but Bitcoin's dominance grew so dramatically that it now represents 78% of the portfolio. The fund reportedly lost $500 million in value as the altcoin holdings underperformed significantly relative to Bitcoin.

WHY IT MATTERS

Imagine you invested in a basket of 10 different fruits at a farmers' market, hoping that spreading your money around would protect you if one fruit's price dropped. But what actually happened is that apples (Bitcoin) kept getting more expensive while the other nine fruits lost most of their value. By the end, your 'diversified' basket was almost entirely apples — and you lost money on everything else. This matters because it shows that in crypto, 'diversification' doesn't always work the way it does in traditional investing. Bitcoin is so dominant that holding a mix of cryptocurrencies can actually increase your risk rather than reduce it, especially when smaller coins decline sharply.

This story highlights one of the most persistent dynamics in crypto markets: Bitcoin dominance cycles. Bitwise's 10 Crypto Index Fund was designed to give investors broad exposure to the crypto market, but the reality of market-cap-weighted indexing meant that as Bitcoin outperformed altcoins, the fund naturally became increasingly concentrated in BTC.

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