During the past two years, cryptocurrency has transformed from a short-term speculative asset into a long-term asset to buy and hold in a well-diversified portfolio. In large part, this is due to the recent launch of exchange-traded funds (ETFs) for major cryptocurrencies.
With that in mind, here are three cryptocurrencies that you can buy and hold for decades.
Bitcoin
Given that Bitcoin (CRYPTO: BTC) accounts for 60% of the total market cap of the crypto market, this is a no-brainer decision. Bitcoin is typically the first crypto added to a portfolio for both retail and institutional investors, and for good reason.
During the past decade, it has been easily one of the top-performing assets in the world. In fact, the crypto has been the top-performing asset in 10 of the past 13 years.
Image source: Getty Images.
And Bitcoin has done so with style. In fact, its weakest bull market year was 2015, when it only returned 36% to investors. In other years, it has skyrocketed as much as 5,428%. Until this year -- which, admittedly, has been a real stinker -- the digital token had delivered two straight years of triple-digit percentage returns.
CRYPTO: BTC
Key Data Points
Some institutional investors now refer to it as digital gold due to its ability to retain its value over a long period of time. Some hedge fund investors also use it as a hedge against macroeconomic uncertainty and geopolitical risk, the same way they use gold.
So I feel confident holding on to Bitcoin for decades. It is the rare asset that has maximum upside potential, as well as some potential downside protection.
Ethereum
Ethereum (ETH 0.14%) ranks second among cryptocurrencies only to Bitcoin in terms of market cap and has a proven track record of success dating from 2015.
CRYPTO: ETH
Key Data Points
What makes Ethereum interesting is that it is a cornerstone for everything that happens within the blockchain and crypto world. In addition to being a digital currency, it is also a blockchain ecosystem. As such, it gives investors unprecedented upside potential.
By investing in it, you're gaining exposure to all the other sectors and niches of the blockchain world, especially decentralized finance (DeFi). And this is what makes Ethereum so exciting. It is now the preferred blockchain of Wall Street. As such, it is at the forefront of several major innovations within the financial sector, including real-world asset (RWA) tokenization, transforming ownership of stock, bonds, and other assets into tradeable crypto tokens.
An investment in the crypto is really a long-term bet on the future of blockchain technology. Over time, larger swathes of the financial sector will likely run on blockchain technology. By holding on to Ethereum for decades, you will be able to participate in this upside potential.
USDC
Lastly, there's USDC (USDC 0.01%), a stablecoin that is pegged 1-to-1 to the value of the U.S. dollar. As long as the U.S. remains one of the top economies in the world, there will be a role to play for USDC.
Decades from now, it should still be in existence. The same cannot be said for other cryptocurrencies, many of which could nose-dive all the way to zero. By contrast, the value of USDC will always be $1, even decades from now.
On the surface, that might sound like a lousy investment. Why buy a digital asset that will always trade for $1? The answer is simple: You can deploy USDC across different blockchains in order to earn a yield. Just as you can earn a yield on dollars sitting in your bank account, you can do so on digital dollars sitting on the blockchain.
Right now, this may not be enticing to the average investor. On the Coinbase Global (COIN 1.78%) cryptocurrency platform, for example, USDC earns a yield of just 3.5%.
But I expect these opportunities to grow over time, thanks to advances in DeFi. Just a few years ago, for example, nobody knew what yield farming in crypto was. Now, it's relatively mainstream.
How to deploy $500 in crypto?
Depending on your risk-reward tolerance, you can construct a portfolio blend that reflects your outlook on blockchain and crypto. Given that Bitcoin currently accounts for 60% of the market cap of the crypto market, a good starting point would be a 60-40 blend of Bitcoin and Ethereum, with any excess funds moved into USDC.
For just $500, it's possible to do exactly that. You could pick up six shares of the iShares Bitcoin Trust (IBIT 0.37%) for about $300, and nine shares of the iShares Ethereum Trust (ETHA 0.54%) for $200. Any remaining funds could then be moved into USDC.
There's no guarantee that Bitcoin and Ethereum will deliver encore performances during the next few decades, just as there's no guarantee that the U.S. economy will remain a global juggernaut. But if I'm buying and holding for decades, I'm moving my money into Bitcoin, Ethereum, and USDC.
