There are literally thousands of cryptocurrencies in circulation today. However, most of them are pointless, meaningless, provide no true utility or value, and will likely cease to exist one day.
For investors new to cryptocurrency, it can be difficult to navigate this maze -- especially when it seems that every other week, some obscure cryptocurrency hits the market and produces a near-immediate return. While it might look attractive, chasing after these "wannabes" is not sustainable for long-term success.
Despite the multitude of cryptocurrencies in existence, there truly is only one that needs to be a part of your portfolio -- Bitcoin (BTC -0.90%). This strategy might not win points for originality, but investing should be simple. By purchasing Bitcoin, investing in the convoluted mess of cryptocurrencies becomes navigable and straightforward.
But coming to this realization might take a little more than just my word.
Follow the leader
Bitcoin is the most valuable cryptocurrency -- by a long shot. As of this writing, its market cap is just shy of $400 billion and is currently worth more than companies like Walmart, Meta Platforms, and Bank of America. It is also more than twice as valuable as its closest competitor, Ethereum.
Of more importance, though, is that Bitcoin makes up the overwhelming majority of the value in the entire cryptocurrency asset class. For this reason, most other cryptocurrencies are actually correlated to Bitcoin's price. As Bitcoin goes, so does the rest of the market.
You could think of Bitcoin kind of like the S&P 500. When it comes to the stock market, popular advice says to invest in the S&P 500 and get back to work. The same could be said of Bitcoin in the cryptocurrency market. Rather than trying to find some obscure cryptocurrency that might beat Bitcoin in the near term but eventually fail, the safer and simpler route is to invest in Bitcoin and hold for the long run.
The truest cryptocurrency
Fully understanding why Bitcoin is at the top takes a little more work and comprehension of complex matters related to cryptography and blockchain science. Rather than getting into the weeds, we will keep this at the surface level.
The original intent of Bitcoin was to create a decentralized and secure means to transfer value without the need of an intermediary like a bank or company taking a cut of money being wired. It just so happens that Bitcoin not only facilitates this, but also possesses characteristics that make it a more effective means to preserve value than the dollar itself.
The creator of Bitcoin has never been found or identified. All the world has is a pseudonym, Satoshi Nakamoto, which was left behind on open forums after the release of Bitcoin in 2009. Whether Nakamoto is just one individual or a group of people, they wrote the code behind Bitcoin to ensure that there will only ever be 21 million coins in circulation. It's a simple but effective way to ensure that Bitcoin benefits from price appreciation as supply decreases and demand increases.
In addition to limiting the number of bitcoins to be created, Nakamoto outdid themselves when orchestrating the means by which Bitcoin would maintain its initegrity. This is where things get a little complicated and words like proof-of-work and 51% attack get thrown around, but to keep it simple, Bitcoin is the epitome of decentralization and security. That's something that many other cryptocurrencies in existence can't even come close to.
These other cryptocurrencies are often controlled by a group of developers, venture capitalists, and founders hiding behind the veil of "decentralization" who actually hold most of the cryptocurrency and are able to inflate its supply, destroy vast quantities of it whenever they want, or even change how it is created. That's not the case with Bitcoin.
Simple and straightforward
This level of decentralization, security, and attractiveness as a store of value has helped Bitcoin ascend to a class of its own and become the most valuable cryptocurrency today. Because of this, Bitcoin is now not only being acquired by retail investors like you and me, but also by publicly traded companies, billionaires, and even the governments of countries.
As this trend of increased demand grows, to the benefit of investors, Bitcoin's limited supply will be put under more pressure and its price should subsequently rise in the future. So rather than trying to find the next meme coin, just keep it simple. Buy Bitcoin, hold, and get back to work.
