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The ultimate cryptocurrency to buy with $1,000
Bitcoin has a unique mix of upside potential and downside risk protection.
The term “ultimate cryptocurrency” can have different meanings, depending on your investment goals, your risk tolerance, and how much you need to invest. But for me, the ultimate cryptocurrency is one that combines explosive upside potential with some degree of downside protection. I’m also looking for a cryptocurrency with growing acceptance on both Wall Street and Main Street, just to give me more peace of mind.
No surprises here, but Bitcoin (Bitcoin 0.33%) comes closest to meeting this definitive cryptocurrency definition. If you are thinking of investing $1,000 in the cryptocurrency market, Bitcoin that might be a good starting point. Here because.
Positive potential
Let’s cut to the chase: The ultimate cryptocurrency should have the potential to turn a relatively small investment into an extraordinarily large nest egg within the next decade. And I can’t think of a better cryptocurrency than Bitcoin to accomplish this. While past performance is certainly no guarantee of future performance, it is difficult to ignore Bitcoin’s historical track record.
In the decade from 2011 to 2021, Bitcoin was the best-performing asset in the world, and it wasn’t even close. During that time period, Bitcoin produced annualized returns of 230%. The next best performing group was the Nasdaq 100 (technology stocks), which returned 20% annually. And Bitcoin’s story of outperformance continued into 2023, when it skyrocketed 155%. In 2024, Bitcoin is already up 58%, on pace for another successful year.
Bearing in mind that Bitcoin is unlikely to replicate this kind of extraordinary performance over the next decade, there could still be many more benefits ahead. Cathie Wood of Ark Invest, for example, thinks so Bitcoin price could rise to $1.48 million by 2030. And this may be the lower limit of expectations. Michael Saylor, founder and president of MicroStrategysuggested that the true value of Bitcoin could be $10 million or higher.
Downside risk protection
You might think that an investment with such high upside potential also comes with an incredible amount of risk. After all, there’s no such thing as a free lunch on Wall Street, right? Of course, Bitcoin has a lot of volatility, which means price swings can be quite dramatic. So you wouldn’t be wrong to consider this as the “price” you pay for Bitcoin’s performance.
But Bitcoin has a unique risk-reward profile. Consider, for example, that some investors consider Bitcoin to be the best hedge against inflation, even better than gold. Additionally, a growing number of portfolio managers are taking it into consideration Bitcoin as a “safe haven” asset. when things get worse in the broader market or when geopolitical risk rears its ugly head on the world stage.
There are a number of reasons for this. One is Bitcoin’s historic lack of correlation with other asset classes. Another is the Bitcoin algorithm, which carefully controls the rate of creation of new Bitcoins. The ultimate goal of this algorithm is to preserve the long-term value of Bitcoin by making it resistant to inflation. Every four years, for example, the rate of creation of new Bitcoin drops by half, in an event known as halving.
Traditional popular acceptance
There’s another area where Bitcoin really shines: its growing acceptance on both Wall Street and Main Street. The single best example of this is the recent introduction of spot Bitcoin Exchange Traded Funds (ETFs) in January. There are now nearly a dozen new Bitcoin spot ETFs, making Bitcoin as easy to buy as your favorite tech stocks. In less than six months, 30 billion dollars have already flowed into these new ETFs.
Image source: Getty Images.
But you don’t have to limit yourself to these ETFs. You could, for example, choose to purchase Bitcoin through a cryptocurrency exchange such as Global Coinbase. Until January, buying Bitcoin through an exchange was one of the most popular options for cryptocurrency investors.
There are other options too. Since Bitcoin is the most popular cryptocurrency to own, it is available for trading on platforms such as PayPal AND Robinhood Markets. Heck, even my local supermarket has a Bitcoin ATM where you can exchange fiat currency (i.e. dollars) for Bitcoin.
Don’t forget about diversification
As you may have guessed, I am very optimistic about Bitcoin’s long-term prospects. But I also recognize that a cryptocurrency portfolio invested 100% in Bitcoin is too risky. You shouldn’t put all your eggs in one basket. Therefore, definitely consider portfolio diversification before spending $1,000 on Bitcoin.
That said, Bitcoin remains the definitive cryptocurrency to buy right now. If you are looking to create future wealth, Bitcoin should be at the top of your list of potential investment options.
Domenico Basulto has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin, Coinbase Global, and PayPal. The Motley Fool recommends the following options: Short June 2024 $67.50 PayPal Calls. The Motley Fool has a disclosure policy.