Navigating the crypto market isn't easy. Investors are faced with the daunting task of combing through thousands of options, with each one seemingly promising life-changing returns.
But when it comes to investing in crypto, it doesn't have to be hard. Similar to investing in the stock market, less is almost always more, and simplicity in a portfolio is a benefit, not a negative.
From this angle, there's one cryptocurrency deserving of a $1,000 investment today -- and it's Bitcoin (BTC -0.75%). This choice probably won't earn points for originality, but when considering Bitcoin's historical performance, dominance over the market, and distinct characteristics, its merit as the ultimate cryptocurrency becomes self-evident.
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Bitcoin's historical performance shines
There's no other way around it: Bitcoin has been the best-performing asset over the last 15 years. While critics will point to its volatility as a reason to avoid it, I see these claims as misconstrued.
Over a year-to-year timeline, yes, Bitcoin's drawdowns are apparent and deserving of attention. But long-term investing should be done with a time horizon greater than just one year. When zooming out, Bitcoin's attractiveness as a long-term investment becomes all the more compelling.
While past returns are not indicative of future performance, it's becoming increasingly difficult to dismiss Bitcoin's cyclical price appreciation. Centered around an event known as a halving, the cryptocurrency's inflation rate is cut in half roughly every four years. With the passing of each halving, Bitcoin's supply comes under greater pressure, even if demand remains constant.
Like clockwork, the cryptocurrency is scheduled to undergo its fourth halving in April 2024. Reducing its inflation rate to a measly 0.85%, this halving could be unlike any other when considering the added demand coming from new institutional investors as a result of the recent approval of 11 Bitcoin exchange-traded funds (ETFs).
Sheer market dominance
Keeping in line with the goal of simplicity, Bitcoin offers investors the greatest amount of exposure to the crypto asset class. Collectively worth $1.5 trillion, it makes up more than 50% of the value of the crypto asset class. As of Jan. 24, Bitcoin's market cap hovered around $782 billion. Ethereum is the next closest at just $267 billion.
By investing in Bitcoin, you're essentially investing in the best the crypto market has to offer. While the majority of cryptocurrencies are somewhat closely correlated to Bitcoin's price, they're often much more volatile.
Admittedly, this can result in the occasional outperformance of Bitcoin to the upside, but it also means that drawbacks are much more severe, common, and painful. While it might not produce the 10,000% return of new meme coins, Bitcoin provides comprehensive exposure. While there are fluctuations daily, over the long term, as Bitcoin goes, so does the rest of the crypto market.
The quintessential cryptocurrency
Arguably, the most compelling aspect of Bitcoin is its unparalleled levels of decentralization, security, and resilience. Embodying everything that a cryptocurrency should be, Bitcoin's unique design prioritizes the core principles essential for longevity and viability.
In terms of decentralization, no other cryptocurrency has come close to challenging it. Today, over 50,000 nodes are running Bitcoin's code, spread out across the globe. The next closest is Ethereum, again, with around 8,000. With such an expansive network, Bitcoin is all the more reliable, decreasing any single point of failure.
Then there's the security of Bitcoin's network. If measuring security among cryptocurrencies were a race, it would have won before it even started.
It's estimated that the cryptocurrency is 500 times more powerful than the world's most powerful supercomputer in terms of operations per second. Thanks to its highly durable security model, Bitcoin is virtually impenetrable. It's never been compromised or hacked, and if the network continues to grow more resilient as it has so far, it likely never will be.
Keeping it simple
While Bitcoin might not be as glamorous or shiny as some of the newer cryptocurrencies, it has a track record that can't be beat. Similar to the stock market, it's survival of the fittest in crypto, and no other is built for the long haul like Bitcoin.
For investors with some extra funds to invest, your $1,000 would find no better home than Bitcoin. Save yourself the hassle, find elegance in simplicity, and see how an investment in Bitcoin is the closest you'll get to guaranteed price appreciation.
