Given the historical volatility in the crypto market, it can be hard to find high-quality cryptos that make good long-term prospects. But there are two cryptos that need to be on your investing radar as we head into the second half of 2023: Bitcoin (BTC -0.69%) and Ethereum (ETH 3.12%).
Both of these cryptos boast huge market caps, long track records of success, and promising future growth prospects. Here's a closer look at both.
Bitcoin
Bitcoin is the world's largest crypto by market cap, and for good reason. Bitcoin is the original cryptocurrency, and over its lifetime has turned in absolutely astronomical returns for patient investors. During the decade from 2011 to 2021, Bitcoin was the best-performing asset in the world, and it wasn't even close. Bitcoin's annualized return stands at 230%, which is 10 times higher than the second-best-performing asset class, the Nasdaq 100 Index.
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However, as savvy investors know, past performance is no guarantee of future performance. The good news, though, is that Bitcoin is just getting started. Institutional investors are now embracing Bitcoin, nations such as El Salvador are experimenting with Bitcoin as an alternative to the U.S. dollar, and new use cases are springing up regularly. This year, for example, saw the launch of Bitcoin Ordinals, a new class of non-fungible tokens (NFTs) for the Bitcoin blockchain. At the same time, nations around the world are now updating their regulatory frameworks to make Bitcoin a legitimate digital asset.
On the basis of these promising developments, future price targets for Bitcoin are growing increasingly aggressive. While some of these price targets are set by crypto enthusiasts and promoters, others have the imprimatur of Wall Street. Goldman Sachs, for example, has put out a $100,000 price target for Bitcoin. And Cathie Wood of Ark Investment Management has suggested a $1.48 million price target for Bitcoin. Given Bitcoin's current price of $26,000, there is obviously incredible upside potential for long-term investors. Just remember, though, that Bitcoin can be incredibly volatile, so there will be pull-backs along the way.
Ethereum
Ethereum is the world's second-largest cryptocurrency and has been an early pioneer in everything from decentralized finance to NFTs. The Ethereum ecosystem is incredibly diversified and includes everything from decentralized exchanges for trading digital assets to Web3 gaming platforms and metaverse worlds. Arguably, Ethereum is the single most diversified crypto that you can own right now, and that can help to reduce some of your risk exposure.
Just like Bitcoin, Ethereum has turned in some head-spinning returns for long-term investors. Since its launch in 2015, Ethereum is now up an incredible 50,000%. While Ethereum likely will not be able to replicate those types of returns, it is certainly building the base for its next stage of growth. In 2022, for example, Ethereum carried out The Merge, a dramatic transformation of its blockchain architecture to make it faster, leaner, and more efficient. By transitioning to a proof-of-stake blockchain from a proof-of-work blockchain, for example, Ethereum became 99.9% more energy-efficient.
In terms of utility and real-world applications, Ethereum is well ahead of most blockchain rivals. Fortune 500 companies are using Ethereum blockchain solutions to improve their supply chains, while top Wall Street banks are experimenting with using Ethereum as a way to optimize trading. On the basis of these emerging use cases across a broad spectrum of industries, New York-based investment firm VanEck recently put out a $50,000 price target for Ethereum (the crypto now trades for about $1,650). While that forecast is aggressive, it does hint at the future upside potential of Ethereum.
Risk factors
Although Bitcoin and Ethereum stand out as the two cryptocurrencies that long-term investors can add to their portfolios, they are hardly risk-free. Right now, there is tremendous regulatory uncertainty hanging over the crypto market, so it's definitely important to keep an eye on what's happening in Washington, D.C., if you plan to invest in these cryptos. In addition, volatility is always an issue for cryptos, where valuations can rise and fall much faster than in equity markets. So you need to be ready to accept some down years in addition to the up years.
But if you are willing to take on this additional risk, you could be rewarded with tremendous potential returns. For that reason, I'm bullish on both Bitcoin and Ethereum as long-term investments.
