According to a study by Jump Crypto, at least 80% of crypto tokens that were launched in the last decade yielded negative returns.
The study by Jump Crypto found that crypto tokens with at least a market cap of $20 million that were launched between 2013 and 2021 did not perform expectedly for early investors. The poor rate of return was seen over 1, 3, and 12 months, of investment, with new coin performance growing worse across time.
Here is a breakdonw of the terms from the above illustration:
- Mean return – A mean return (also known as expected return) is the estimated profit or loss an investor expects to achieve from a portfolio of investments
- Median Return – When there is an odd number of returns for an asset, the middle return will be the median. In the case of an even number of returns, the middle pair of returns will be averaged to determine the median
- % Under Water – When the market value of an asset is less than the original amount that the owner paid for it, such an asset has gone underwater
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According to Jump Crypto, such a history of returns indicates that the crypto market is efficient and that investors can not easily predict the market, as may seem from face value.
Specifically:
- New token returns are not predictable based on the underlying crypto environment in which they are launched
- Returns are also not predictable based on the relative performance of their peers
Such performance of crypto tokens mirrors VC performance in traditional markets where 80% of investments do not yield returns and most of the gains come from 20% of investments.
Jump did the analysis from the perspective of a ‘mainstream’ Bitcoin investor, who they said measures their returns to holding a new token in Bitcoin-denominated terms. The methodology takes into account general market sentiment for Bitcoin and the other cryptocurrencies, according to Jump.
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RECOMMENDED READING: Understanding Different Types of Coins and Tokens in Crypto
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