The Boglehead way of Cryptocurrency?

Hi folks, I came from r/Bogleheads subreddit (which is still a subreddit that I highly recommend for financial retirement planning in the US). The two subreddits probably don't go well together (some in r/Bogleheads probably treat crypto as a total Ponzi scheme LOL, while a lot of people in CC will treat existing stocks as just the establishment system). Nevertheless, the Boglehead method of investing is a link that I see can connect the two subreddits together. It basically tells the investors to invest in the entire market, that is investing with an allocation that matches the market cap weighted.

In financial theory, the Arithmetic of Active Management is one of the most solid, yet simple method of building a portfolio that guarantees to capture the risk of the whole asset class and is the motivation behind index fund. It basically divides investors into two groups of people

The theory

1. If you own a portfolio in which each stock has an allocation that matches the market cap weight of that stock, you are a passive investor. For example, if 7.21% of the market is AAPL, then 7.21% of your portfolio is AAPL. This is also known as the market portfolio
2. If you own a portfolio that does not match the market (for example, 50% of your stock is NVIDIA), then you are called an "active manager"

The theory is that the first group effectively owns x% of each stock in the market, and the 2nd group, even though each has a different portfolio, owns 1-x% of each stock in the market in aggregate. Each portfolio of the 2nd group might be different, but in aggregate, they have the same portfolio as the first group. Hence, they also have the same return

However, the first group just buys and holds, while the second group actually sells back and forth, and the 2nd group ends up incurring more costs (more transaction cost, more short-term capital gain due to selling, more spread). Therefore, they will end up underperforming the first group over time. There is also the fact that hedge funds rarely ever consistently beat the market by the cost they incur for a long period of time, and cannot be trusted to beat the market.

Application to crypto

It seems to be that this will be an extremely efficient way to hold the market, and simply enjoy the gain of the entire cryptocurrency universe as a whole. If you own basically x% of all crypto that matches the market cap weighted (48.2% BTC, 18.9% ETH, ...), then the market cap weight increase will become your return. Furthermore, you never have to rebalance, which triggers capital gain. If you need to sell, then just sell the oldest acquired cryptos in your portfolio for minimal gains.

Downside?

What are the downsides that you can think of for investors in this group?

1. Specifically for crypto, any "market portfolio" will have to be screened for scams. You cannot invest in scams because x% of a scam coin is absolutely worthless. Therefore, this strategy only seems to work for somewhat more established coins.
2. Inflationary coins. Inflationary coins guarantee that x% will be lower in the future. On the other hand, the deflationary coin will be better because it actually guarantees that x% will increase over time automatically.
3. Exit liquidity. One has to be aware of dying projects. Even as the owners own x% of that coin, if the project is dying, there will not be liquidity for the owners to actually realize those gains.
4. Losing the passivity of the investment over time: As the owner starts to own more and more of the coin, and hold more voting power, they will need to be more active to keep the project alive. They can't just hoard the coin, hoping it will go up, but will need to gain skin in the game and actually contribute to discussion, voting, and developments.

How to hold cryptos in Boglehead manner?

Given these downsides, I only see this method being good for small and medium investors, who want to seek broad exposure to cryptos. And they should also only invest in somewhat big projects that are guaranteed to never go away like BTC, ETH, and maybe the top 20 altcoins that already make up 90% of the market.

However, if such investors can do that. This is a great way to hold a diversified portfolio of cryptos in a tax-efficient manner.

I am thinking of getting back to crypto by the end of the year and thinking of an efficient way to hold cryptos. Look forward to hearing your feedback.

Edit: Thank y'all for the comment. Looks like sticking with BTC and ETH is the way to go for the time being!