The cryptocurrency market might be young, but investors have benefited from some huge gains. That hasn't stopped the industry from continuing to be extremely volatile, though. The overall industry's market cap has dropped 22% since hitting a peak of $4.2 trillion in early October (as of Nov. 15).
Some investors still aren't discouraged and are looking to put money to work in the space. The potential for big returns is still there, to be sure. But it's important to look at a clear leader. Here's the best cryptocurrency to buy right now with $1,000.
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Apply Warren Buffett's thinking to Bitcoin
Warren Buffett, the legendary investor who has a stellar track record running Berkshire Hathaway, is famously not a fan of Bitcoin (BTC 1.04%), calling it rat poison squared in 2018. However, investors can use the Oracle of Omaha's thinking, particularly as it relates to economic moats and competitive strengths, to understand why Bitcoin is the clear favorite among the sea of cryptocurrencies.
For starters, without a doubt, Bitcoin has the strongest and most widely recognized brand name in the industry, with an incredible mindshare. It's the first and oldest crypto, with the white paper being released 17 years ago. It's also the most valuable, carrying a market cap of $1.9 trillion. When people think of cryptocurrencies, Bitcoin is likely the first name that comes to mind. It's also worth pointing out that compared to Ethereum, a much higher number of fund managers probably have exposure to it.
Besides brand recognition, Bitcoin benefits from a powerful network effect. It's a monetary network, after all, which allows it to become stronger as its base of users, nodes, miners, and developers grows. What's more, there's an expanding infrastructure of products and services out there, from financial services to energy, that support Bitcoin's utility and adoption.
Warren Buffett likes to identify businesses that he can own forever. Durability is an often overlooked characteristic, but it highlights staying power and the ability to navigate various scenarios. No other cryptocurrency can be mentioned in the same breath as Bitcoin here. The longer Bitcoin remains relevant, the longer its expected survival rate. The network has never been hacked, it has handled various macroeconomic situations, and it's operating with a more accommodative regulatory backdrop. These factors support Bitcoin's long-term viability.
Bitcoin's brand name, network effect, and staying power are three key Buffett-inspired reasons that it's the best cryptocurrency to buy.
CRYPTO: BTC
Key Data Points
Bitcoin has massive upside over the long term
The numbers reveal that Bitcoin is one of the best-performing assets in recent memory. Over the past 10 years, its price has skyrocketed 28,500%. The closely watched S&P 500 Index has put up a total return of 296% in that same period. Bitcoin has soared in the past, but there's still significant upside over the long term.
Gold provides a simple comparison. The precious metal has been viewed as the top store of value for thousands of years. It's estimated that the entire value of gold above ground is $28.4 trillion. I believe that Bitcoin's market cap could rise 15-fold to reach gold's figure within the next 10 to 20 years. And there's a good chance that the crypto can exceed the shiny metal.
There's a limited supply of gold, but Bitcoin is even scarcer. There is a hard supply cap of 21 million coins. And Bitcoin's supply can't be adjusted to respond to surges in demand.
Bitcoin is also easier to transact with. Try slicing off a piece of gold to pay for an online purchase. Bitcoin can be transported across borders with minimal effort. And the fact that it's purely digital gives it an advantage in today's internet-driven economy.
Bitcoin is the best cryptocurrency to buy with $1,000.
