Bitcoin, as the pioneer of crypto-assets, holds the largest market capitalization in the cryptocurrency market and periodically attains high levels of dominance over other altcoins. Depending on their risk appetite, investors may shift their preferences toward alternative crypto-assets within cryptocurrency markets. This study examines the risk-adjusted performances of the five largest altcoins by market capitalization following Bitcoin. Accordingly, the study provides empirical findings indicating that Bitcoin serves as a benchmark for investors who allocate funds to altcoins primarily for additional return motivations, and that performance is evaluated along the risk–return trade-off.

The findings offer insights into whether the additional risks assumed by investors through altcoin investments are grounded in a rational framework. The altcoins included in the analysis are Ethereum (ETH), Ripple (XRP), Binance Coin (BNB), Solana (SOL), and Dogecoin (DOGE). Risk-adjusted returns are calculated using the Sharpe, Treynor, Jensen’s Alpha, M², and Sortino ratios. Bitcoin is employed as the benchmark asset, while the yield on the U.S. 3-Month Treasury Bill is used as the risk-free rate.

The analysis covers the period from January 1, 2023, to September 1, 2023, a timeframe during which cryptocurrency markets exhibited relatively stable conditions. This period selection aims to eliminate the effects of strong bull and bear market phases in order to obtain more robust results. Daily returns of cryptocurrencies are calculated based on the UTC 00:00 closing prices.

According to the empirical findings, Ethereum (ETH) exhibits the highest beta, while Ripple (XRP) has the lowest beta among the examined altcoins. In terms of performance criteria, Solana (SOL) ranks first across all performance measures except the Treynor ratio, in which it ranks second. Binance Coin (BNB) is identified as having the weakest performance. Another notable finding is that, except for BNB, all altcoins included in the study exhibit positive performance scores. In contrast, BNB records negative values across all performance ratios.

Overall, the findings of the study provide informative and forward-looking insights for both active investors in cryptocurrency markets and potential investors considering altcoin investments.