Bitcoin Investment Guides, Investing

Bitcoin Vs. ICOs: Which Investment is Better?

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The price of bitcoin surged to new highs almost every week after it was announced that the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) are launching bitcoin futures contracts that allow institutional investors to bet on the price development of bitcoin.

Boosted by new funds flowing into the digital currency from institutional investors combined with the US CFTC’s de facto stamp of approval to invest in bitcoin, investors witnessed the doubling of the value of bitcoin within four short weeks.

As the attention in the crypto investing space has shifted back toward bitcoin and away from the hyped-up initial coin offering sector, the question investors have is “Which investment is better?

Bitcoin vs ICOs – Since Inception

When bitcoin first started to trade in early 2009, the price of one bitcoin was less than one cent. Using one cent as a proxy number, the value of bitcoin has rallied by over 170 million percent since its inception. This performance is unparalleled in the world of digital assets.

The three best performing ICO tokens – NXT, IOTA, and ether – have generated a return on investment of 4 million percent, 950,000 percent, and 235,000 percent respectively since their token sales.

Bitcoin has, therefore, been the clear winner when it comes to price growth since inception. However, if you look at the price data of the best performing ICO tokens versus bitcoin since their initial coin offerings, a different picture emerges.

Bitcoin vs ICOs – Since the Initial Coin Offerings

According to digital assets analysis platform ICOStats, the three best performing ICO tokens – NXT, IOTA, and ether – have actually outperformed bitcoin by a substantial margin since they were issued.

  • NXT, which was launched in December 2013 as one of the first digital currencies issued through an initial coin offering, has outperformed bitcoin by over 33,000 percent since then.
  • IOTA was issued in November 2015 and started trading on exchanges in June 2017. Since its ICO, the price of IOTA tokens has outperformed bitcoin by over 19,000 percent.
  • Ether, on the other hand, has outperformed bitcoin by over 9,000 percent since its token sale in 2014.

Aside from the three best performing ICO tokens, there are around 30 digital tokens that have outperformed bitcoin since their launch, according to ICOStats. In other words, if you managed to pick winners in the ICO market, then you have a reasonable chance of your ICO investment outperforming bitcoin. However, this potentially higher return also comes with a substantial amount of risk – higher than the risk of bitcoin.

Bitcoin vs ICOs – The Future

While no one has a crystal ball that can predict with accuracy where digital asset prices will be in five or ten years’ time, bitcoin is currently well-positioned to maintain its status as the world’s leading and most popular digital currency. As mentioned before, the majority of new money – from both institutional and private investors – flows into bitcoin first before it moves into altcoins. This, in turn, puts upward pressure on the price of bitcoin, which is what makes bitcoin such an interesting and potentially lucrative investment despite the fact that it has already rallied so much in the past eight years.

On the matter of ICO tokens, on the other hand, industry experts agree that the majority of recently issued digital tokens will eventually become worthless as many of the projects that have been funded through ICOs will fail. Furthermore, as more institutional money flows into digital assets, that money will very likely go into the largest digital currencies since they have the highest liquidity. Hence, digital tokens of smaller blockchain projects that have not managed to grow substantially in market capitalization will likely struggle to increase in value as institutional investors will likely come to dominate the digital asset market.

Having said that, the most promising blockchain projects that have issued new digital tokens to fund themselves have experienced substantial increases in token values and have outperformed bitcoin since their token sales.

Some experts believe that the price of bitcoin could reach one million dollars within the next five years. That would mean a 5,750 percent return on investment form bitcoin’s current level of around $17,000. If you compare that to some of the recent performances of ICO tokens such as NEO, Stratis, or Ark, which have generated ROIs of 155,000 percent, 134,000 percent, and 46,000 percent respectively, there is definitely an argument for investing in ICO tokens since the potential returns could be much higher than those of bitcoin.

Which is the Better Investment?

When comparing bitcoin and ICO tokens, it is important to note that you are not comparing like-for-like. Bitcoin is a digital currency that is used to store, send, and receive financial payments while most ICO tokens are utility tokens that play a specific role within a specific blockchain platform.

It is, therefore, difficult to judge whether a bitcoin investment or an ICO investment is better. That decision is always up to the investor and is closely tied in with the investor’s risk preference. ICO tokens are a much riskier investment than bitcoin, but they also carry a higher potential to generate much higher returns if you manage to pick the right ones.

At the end of the day, the smartest way to invest in digital assets is to build a well-diversified portfolio based on your risk preference and investment goals. Such a portfolio would likely include a substantial holding in bitcoin and small exposure to promising ICO tokens. The more conservative an investor is, the higher his or her bitcoin holding would be, while a more adventurous risk-taking investor would allocate a higher percentage to promising ICO tokens.

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  • Additionally, be sure to visit our initial coin offerings page, where you will find up-to-date information about current and upcoming ICOs to help you make informed ICO investments.

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