Fear & The Ever-Alluring Risk/Reward Ratio
Are altcoins worth the risk? Many crypto investors have begun pondering this question in recent years. I have seen several Crypto enthusiasts turn their backs on altcoins in favor of BTC and, in certain instances, ETH. However, studying Ethereum’s price action in 2024 and 2025 leaves much to be desired.
Understanding and implementing a viable risk/reward ratio is at the heart of any effective investment strategy. An asset with an associated higher risk should provide the potential of a more significant return. A lower-risk profile asset will subsequently provide a less impressive potential return. The risk/reward ratio of BTC is favorable and even viable. However, there is a catch.
Bitcoin is a great long-term investment vehicle and offers impressive returns compared to existing TradFi investment vehicles and asset classes. However, in terms of its ability to create wealth, it’s no longer a viable option.
Those who have chosen the camp of the Bitcoin maxi have already amassed a significant amount of capital. In other words, Bitcoin is being utilized as a value store, which increases in value every three to four years. In such a scenario, Bitcoin is a smart move. However, how many Crypto investors are in such a financial position? That’s precisely why they entered the space in the first place.
Investment Objectives Are Subjective
Depending on your desired outcome, risk/reward ratios and Investment decisions are subjective. This is primarily why I abandoned the idea of ETH as an investment option for the current bull market. It no longer serves my objective. Furthermore, the risk/reward ratio is nowhere near as attractive as Bitcoin’s when mitigating risk while simultaneously enjoying reasonable gains.
Ethereum has been strongly correlated to the altcoin index. However, many altcoins have surpassed ETH in terms of price action and realized gains.
What does this mean? In simple terms, ETH has failed to be a safer investment choice than altcoins. At the same time, many altcoins have outperformed ETH. The risk/reward no longer makes sense, or at least is attractive. Many investors are excited about a $10K ETH price. However, this is insignificant in percentage terms and will do little to bolster your portfolio. Compare Ethereum’s price action with a relatively well-established altcoin like ChainLink.
LINK has outperformed ETH rather significantly and is not an incredibly risky asset. It is a blue chip altcoin. Since January 1st, 2024, ETH has risen as high as 86%, whereas LINK has increased 153% in the same time frame.
In other words, similar risk profiles but with more favorable results for LINK. If ETH’s staking reward was significantly higher, one might be willing to compromise. However, it is one of the lowest in the industry. This is another reason why RWA-based assets are an attractive option for the remainder of the decade; there is an associated intrinsic value via real-world assets.
RWA is currently one of the most attractive asset classes in terms of risk/reward ratios and medium—to long-term growth potential. Yes, ETH is a foundational technology and digital asset, but there are far more attractive risk/reward ratios as an investment vehicle. Even a $15K to $20K ETH price would not be something to write home about. However, many are impressed by the possibility of such a price target.
Maturation regarding adoption and market cap reinforces the ceiling of any asset. Breaking through and entering a new price discovery and appreciation phase becomes increasingly tricky.
Investors need to consider this dynamic. In terms of Bitcoin or Ethereum, I would side with Bitcoin as a relatively safe yet appreciating asset. Different risk/reward ratios that align with one’s desired outcome must be identified depending on one’s investment goals.
Final Thoughts
Crypto investors looking to turn modest portfolios into life-changing capital must consider and study risk/reward ratios. Understanding risk/reward ratios automatically results in understanding effective capital deployment. Very little capital is required in specific scenarios, and the risk is high. However, if the project succeeds, the returns are enormous.
Always consider your objective and what you hope to achieve. There is no one-size-fits-all approach to Crypto. Although the asset class may seem equally risky, it is broken down into many subsectors regarding risk and potential returns. You must apply the appropriate strategy with the proper assets to achieve your desired end. All the best! See you next time!
Sapphire Crypto 