It's impossible to ignore what's happening in the crypto market right now. Prices of top cryptocurrencies are down as much as 30% to start the year, and the number of top cryptocurrencies posting positive returns for the year has dwindled to a small handful.
With that in mind, I'm taking a defensive approach right now. I'm choosing cryptocurrencies that offer plenty of downside protection, while simultaneously offering the prospect of outsize returns over the long haul. Here's how I'd put $1,000 to work right now.
$700 into Bitcoin
Right now, Bitcoin (BTC 0.60%) accounts for an astounding 60% of the crypto market's total market cap. Thus, any market-weighted crypto index or market-weighted crypto fund will be heavily weighted toward Bitcoin. I'm choosing to go overweight here, with plans to put $700 into Bitcoin.
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Bitcoin is currently down 47% from its all-time high just a few months ago, and trades for just $67,000. That's simply too cheap. That's the lowest price Bitcoin has traded at since the 2024 presidential election, when it was around $69,000. As recently as October, Bitcoin was a $126,000 crypto.
CRYPTO: BTC
Key Data Points
Best of all, plenty of Wall Street analysts think Bitcoin could hit the $1 million mark by 2030. So, I'm ignoring current market volatility and focusing on the long haul. This is a cryptocurrency with 10x and perhaps even 15x upside potential over the next five years.
$200 into Ethereum
In August, Ethereum (ETH 0.14%) was trading at $5,000. Today, it's trading for a bargain-basement price of $2,000. That's a stunning 60% decline in a matter of months.
CRYPTO: ETH
Key Data Points
Just like Bitcoin, Ethereum appears to be significantly undervalued. It remains the dominant Layer-1 blockchain in the world, and has a commanding 56% market share in the decentralized finance (DeFi) sector.
If you buy into the idea that traditional finance will eventually merge with blockchain finance, you absolutely need to own a piece of Ethereum right now. In areas ranging from stablecoins to real-world asset (RWA) tokenization, Ethereum is leading the way.
$100 into gold stablecoins
Ordinarily, putting money into gold would be a purely defensive move. But I don't necessarily see it that way. Gold-backed stablecoins are booming this year, and are one of the only pockets of strength right now in the crypto market.
My favorite gold stablecoin right now is PAX Gold (PAXG 0.95%), which is up an impressive 16% to start the year. As long as the price of gold tracks higher, so will PAX Gold, given that it is pegged 1:1 to the price of gold.
Creation of a 70/20/10 portfolio using ETFs
It's relatively easy to construct this 70/20/10 crypto portfolio now that spot crypto ETFs were introduced in January 2024. For $700, for example, you could pick up 18 shares of the iShares Bitcoin Trust. For $200, you could pick up 13 shares of the iShares Ethereum Trust. And for $100, you could pick up 1 share of the iShares Gold Trust.
Over time, I fully expect Bitcoin and Ethereum to recover and lead the market higher. But just in case, I've added in a bit of gold for extra downside protection.
