Navigating the crypto landscape can be a challenge, especially in a bull market when just about every cryptocurrency seems to be rising. With myriad options promising life-changing gains, cutting through the noise is no easy task.
For investors looking to find some clarity in a crowded field of options, the best strategy is often the simplest. As with the stock market, it is possible to spread your crypto portfolio too thin, inevitably introducing unnecessary risk.
One cryptocurrency stands out as deserving a $1,000 investment today: Bitcoin (BTC 1.49%). While this pick may lack originality, its historical performance, market dominance, and unique characteristics make it a standout choice that no other cryptocurrency can match.
Image source: Getty Images.
Proven historical performance
There is a laundry list of arguments that portray Bitcoin as a risky and volatile asset undeserving of an investment. Although short-term fluctuations are real, a long-term perspective reveals Bitcoin's attractiveness as a robust investment.
Bitcoin has proven itself as the top-performing asset during the past 15 years. Driving much of this performance is Bitcoin's robust monetary policy. Centered around an event known as a halving, Bitcoin's supply growth rate is cut in half every four years. This process will continue until the last Bitcoin is mined in about 2140, at which point the cryptocurrency will enter unprecedented territory.
With the upcoming halving in April, Bitcoin will see its supply growth fall from 1.75% a year to just 0.85%. Historically, in the year of a halving, Bitcoin's price jumps by 120% on average as demand is forced to compete for a tightening supply. Only time will tell if 2024 follows patterns of years past, but even if this year turns out to be an anomaly, Bitcoin's long-term value should stay on a positive trajectory considering trends of increasing adoption and continued reductions to its supply growth as more halvings pass.
Complete market dominance
For those seeking simplicity in their crypto portfolio, few options are more appealing than Bitcoin. As of Feb. 22, the entire crypto asset class was valued at about $2 trillion. Of this, Bitcoin makes up more than $1 trillion. Its closest rival is Ethereum, worth just $360 billion.
Due to this disproportionate valuation, the vast majority of other cryptocurrencies are highly correlated to Bitcoin's price. In other words, if Bitcoin's value rises or falls, the values of most cryptocurrencies will follow suit.
Although other cryptocurrencies may occasionally outperform Bitcoin, they usually possess much greater volatility and risk. During bull markets, some of these cryptocurrencies may rise at a faster clip, but when bear markets set in, the drops become much more severe. While Bitcoin might not produce the 10,000% return that new cryptocurrencies sometimes see, it provides simple and comprehensive exposure to the entire asset class with considerably less risk.
One of a kind
We can't talk about Bitcoin without discussing how it has risen to become the most valuable cryptocurrency. Surely its position as the first cryptocurrency to be invented gave it a head start, but the main reason it has maintained this position for roughly 15 years has to do with the distinct characteristics that set it apart from any other cryptocurrency.
Bitcoin is the quintessential cryptocurrency. It is the most decentralized, secure, and durable blockchain ever invented. With more than 17,000 nodes globally and estimated to be 500 times more powerful than the best supercomputers in the world, Bitcoin is virtually un-hackable. Best of all though, it has been able to achieve this without any centralized figure or entity overseeing it, a feat no other cryptocurrency can claim.
Simple but effective
While Bitcoin may lack the glamor of newer cryptocurrencies, its unparalleled track record positions it as a formidable long-term player. Just like the stock market, survival of the fittest reigns in the crypto realm, and Bitcoin has proven why it is the ultimate survivor.
For those with an extra $1,000 at their disposal and looking to gain some exposure to crypto, there's no better option than Bitcoin. Save yourself the hassle, appreciate the beauty in simplicity, and discover how an investment in Bitcoin could be your closest route to long-term portfolio growth.
