It can be difficult navigating the crypto market when it seems like a new project comes along every week promising to fix or solve some existing problem.
The promise of new cryptocurrencies is rarely met with tangible results. That is why keeping it simple is often the best investment strategy.
Cryptocurrencies are naturally riskier due to the lack of government oversight, 24/7 leveraged trading, and simply being a new asset class that is trying to find its appropriate value. Instead of taking on even more risk and gambling on the next meme coin that will inevitably head to zero, there are more reliable strategies.
It isn't always glamorous or exciting, but every crypto investor should hold a significant amount of Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) in their portfolio.
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The king of crypto
Bitcoin is the most valuable cryptocurrency in the market, and for good reason. It pioneered the trail that every other cryptocurrency has since followed.
Bitcoin rose to the top because it is highly decentralized and extremely secure. Although not as fast as newer cryptocurrencies, Bitcoin holders can be confident that their investment is on one of the most innovative blockchains ever created.
Furthermore, Bitcoin has proven that when held for the long haul, its owners reap consistent profits. On average, Bitcoin has tripled annually for the past 11 years. There have been significant retreats, like the one we are in now. But when averaging out all the ups and downs, those who hold are rewarded.
To further quantify the benefits that long-term holders have, a report from BitcoinEconomics.io in 2019 calculated that, on average, holders make a 100% profit after holding Bitcoin for 1,235 days, or 3.38 years.
Now, this is just an average, and nothing is set in stone, but it shows that those who weather market reversals like the one we are seeing now are generously rewarded. And compared with the rest of the cryptos out there, Bitcoin has the longest track record, which makes these sorts of statistics much more meaningful.
The king of DeFi
While there are other cryptocurrencies that have been around longer than Ethereum, few have had as much of an impact on the trajectory and development of crypto as Ethereum.
Without Ethereum, DeFi likely would not even exist. Ethereum is unique due to its programmable smart contracts. These smart contracts are what enable DeFi to operate. Smart contracts are the foundation for decentralized exchanges, lending, borrowing, and all kinds of DeFi applications.
Since the takeoff of DeFi, there have been numerous competitors that have arisen to challenge Ethereum. Cryptocurrencies like Avalanche, Solana, Binance Smart Chain, and Polkadot have all created blockchains that integrate smart contracts in hopes of stealing some market share.
Yet their attempts have been futile, and Ethereum still holds more than half of the entire DeFi market in its blockchain.
Ethereum's grasp on DeFi doesn't seem to be going anywhere anytime soon. On the horizon, Ethereum might further cement its dominance of DeFi when the blockchain transitions from proof of work to a less energy-intensive proof of stake. Known as "The Merge," the change is scheduled for August and will bring a bundle of much-needed upgrades to make transactions cheaper and faster.
Whether you are just getting started in crypto or you are a veteran of the industry, there are really only two cryptocurrencies that must be a part of all portfolios. Few cryptocurrencies have left a mark on the sector like Bitcoin and Ethereum. Exposure to these two is a must for any long-term holder. Keep it simple, ignore short-term fluctuations, and stay consistent.
