The entire cryptocurrency market is worth $2.6 trillion (as of Sept. 2). This is slightly lower than the valuation of Amazon, one of the world's most dominant businesses.
Despite its size, the crypto industry is still considered a very risky place for investors to allocate capital. While it's never a good idea to concentrate too heavily in one particular corner of the market, curious investors should still think about the best ways to gain digital asset exposure in their portfolios.
Even a relatively small sum of $1,000 is a good place to start. With this money, here's the top cryptocurrency to consider buying right now.
Image source: Getty Images.
Steady hands eventually see the light at the end of the tunnel
I believe it's a smart idea to keep things as simple as possible. In the cryptocurrency market, this will lead you toward Bitcoin (BTC +4.40%). With its first block being mined in January 2009, this is the oldest digital asset.
It's also the most valuable. Bitcoin's market cap of $1.5 trillion represents almost 60% of the overall cryptocurrency industry.
After hitting a peak price of about $126,000 last October, Bitcoin has been navigating a notable downturn, trading 36% below that record. But it has bounced back in the past couple of weeks, rising 26% since Aug. 19.
History says that these bear markets, while extremely stressful to live through, are normal. During the past 10 years, Bitcoin's price has tanked at least 50% on four different occasions. Every single time, it came roaring back to establish a fresh all-time high.
This means that for investors to capture winning returns, they must be able to stomach the volatility. This is the price of admission. It separates the patient and disciplined Bitcoin "hodlers" (crypto lingo for holders) from the weak-handed market participants.
Bitcoin's price tend to follow a four-year cycle. Its bull-market tops occur roughly every four years. Its bear-market bottoms happen about every four years as well. What this trend reveals is that Bitcoin could hit a low late this year or in early 2027. Then, it will start climbing to reach a new record toward the end of 2029.
CRYPTO: BTC
Key Data Points
Capital will continue to flow to a fixed-supply asset
When the Bitcoin whitepaper defining the crypto was released in October 2008, it was held out as a true innovation. This technology enabled, for the first time ever, one party to send value to another party anywhere in the world without the need for an intermediary. The only requirement was access to the internet.
This breakthrough supports the bullish view that Bitcoin's ultimate purpose is to become a medium of exchange. In other words, the cryptocurrency's most vocal supporters think that it will be used more widely as a method of payment in everyday transactions. This is Bitcoin's true north, the thinking goes.
To be clear, though, this is still a long way off. The leading payment networks, credit cards, and physical cash still dominate. They come together to create a robust network effect that will be hard to topple. It's not impossible, but Bitcoin's financial infrastructure needs to keep developing. Individuals must also be incentivized to transact with this digital asset.
Therefore, for the next five years and beyond at least, Bitcoin's investment thesis rests solely on it becoming more broadly adopted as a store of value and financial asset that any stakeholder group -- individuals, corporations, institutional asset managers, or governments -- will want to allocate some of their savings to with a long-term time horizon.
Despite its volatility, Bitcoin has done nothing except raise the purchasing power of its investors over time. During the past decade, its price has skyrocketed about 15,000%, appreciation that is a result of its fixed supply, decentralization, and security.
I believe a $1,000 investment in Bitcoin today will be worth a lot more in the future.
