In 2023, crypto seems to be on the cusp of finally being recognized as a viable long-term investment option for patient, buy-and-hold investors. Big institutional investors are grudgingly acknowledging that crypto is an asset class worth investing in, albeit a very high-risk and volatile asset class. At the same time, there is growing discussion among some of the biggest names in the industry about crypto as a way to plan for retirement.
With that in mind, here's a closer look at three cryptos -- Bitcoin (BTC -3.64%), Ethereum (ETH -2.40%), and Polygon (MATIC -4.23%) -- that might be suitable for anyone taking a long-term view of the market.
1. Bitcoin
The obvious starting point for anyone constructing a long-term crypto portfolio is Bitcoin, which now accounts for close to 45% of the entire capitalization of the crypto market. While crypto is hardly a "safe" buy-and-hold investment, Bitcoin has proven surprisingly resilient to the ups and downs of the crypto market. Over its 14-year history, Bitcoin has weathered several major crashes, including one back in 2011 that saw its price plummet to $0.01 in a matter of days. But each time, Bitcoin has bounced back better than before.
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One long-term investment thesis for Bitcoin is that it is "the future of money." Over time, Bitcoin will become increasingly important as an online payment option. According to some Bitcoin bulls, such as Silicon Valley venture capitalist Tim Draper, Bitcoin will one day be used for all online transactions. When Draper recently suggested that Bitcoin might skyrocket to $250,000, this is what he had in mind.
Taking a very long-term view of things, Bitcoin could eventually start to supplant sovereign currencies. That was the original vision of Satoshi Nakamoto, the anonymous creator of Bitcoin. The famous Bitcoin white paper has been used to suggest that a decentralized, peer-to-peer digital currency like Bitcoin could be superior to fiat currencies when it comes to managing macroeconomic factors such as inflation. After all, Bitcoin has a fixed total coin supply of 21 million, so there is no risk of hyperinflation from a government or central bank producing too much money.
2. Ethereum
Another coin with remarkable long-term staying power is Ethereum, which accounts for another 20% of the entire capitalization of the crypto market. While Bitcoin's primary function is as a store of value and an online payment option, Ethereum promises much more in terms of utility and real-world use cases. Ethereum pioneered the concept of smart contracts back in 2015, and since then, has been an innovation leader when it comes to decentralized finance, gaming, the metaverse, and digital assets such as non-fungible tokens (NFTs).
The best way to think about Ethereum is that it is a foundation, or base, for everything that developers can think to build in the blockchain and crypto world. And this is what gives Ethereum so much long-term appeal. When you invest in Ethereum, you are not just investing in a single cryptocurrency, you are also investing in an entire blockchain ecosystem. Some analysts once referred to Ethereum as "digital oil" for its ability to power the modern blockchain economy.
Now that Ethereum has transformed into a faster, energy-efficient blockchain as a result of The Merge, it is better positioned than ever to be the leading Layer 1 blockchain in the world. Already, Ethereum founder Vitalik Buterin has laid out a fantastic long-term roadmap for the blockchain, in which it will eventually be able to process 1 million transactions per second. When that happens, Ethereum will become faster and more powerful than today's credit card networks, which can process only 24,000 transactions per second.
3. Polygon
Finally, there's Polygon, which has vaulted into the list of the top 10 cryptocurrencies by market capitalization largely based on its ability to generate innovative use cases for blockchain technology. For example, Polygon has already partnered with Walt Disney, with a long-term aim of developing new use cases within the entertainment sector. It has partnered with Starbucks on a new Web3 customer loyalty program. And it has partnered with Meta Platforms with the goal of making NFTs mainstream for billions of social media users around the world.
Part of Polygon's appeal is that it is a scaling solution for Ethereum. Polygon leverages the security and stability of Ethereum, and then uses its own cutting-edge technology to bundle transactions and deliver world-class performance for end users. In 2022, Buterin praised Polygon for its "truly amazing" new scaling technology. Thus, as fast as Ethereum can grow, Polygon might be able to grow even faster.
Buy and hold for the long term
While crypto is often associated with short-term speculation and market timing, there is an increasingly robust case for crypto as a long-term investment option. Forget about the silly meme coins and focus on the coins and utility tokens that are developing the future of money and growing the modern blockchain economy. For that reason, I'm long-term bullish on Bitcoin, Ethereum, and Polygon.
