Investors add cryptocurrencies to their portfolios, both Bitcoin and Ethereum are good long-term investments.
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When it comes to creating a long-term buy and hold strategy, many investors love the idea of adding cryptocurrencies to their portfolios. Yes, crypto is a highly volatile and speculative asset class, so adding it to an investment portfolio where you hope to deliver superior long-term returns may seem like an unlikely match.
However, many of the top cryptocurrencies are starting to develop a historical track record of success. Bitcoin (BTC), for example, recently celebrated its 14th birthday. Ethereum (ETH) was announced nearly nine years ago by blockchain pioneer Vitalik Buterin. These cryptocurrencies have seen their share of market corrections and crashes and have emerged as the most popular investment options for crypto investors.
3 cryptocurrencies targeted by the consulting firm
Bitcoin (BTC)
Bitcoin was, quite literally, the first buy-and-hold cryptocurrency. If you bought Bitcoin in 2009 and have continued so far, you would have made a huge profit of 16,979.47%. Moreover, Bitcoin has repeatedly bounced back from market reversals and even market crashes. If you think 2022 is tough, look at 2018, when Bitcoin fell 73%. As we stated as Kriptokoin.com, BTC is instantly traded at $ 23,260.
Looking at Bitcoin from a long-term perspective, there are two reasons to be optimistic about the future of this cryptocurrency. The first is that Bitcoin has a fixed supply of cryptocurrencies. Only 21 million bitcoins have ever been created, so over time they become less common and more valuable. This is due to the algorithmic nature of Bitcoin, which specifically defines how much Bitcoin can be mined. This is why people refer to Bitcoin as digital gold. Just as the Earth’s supply of gold is limited, so is the Earth’s supply of Bitcoin.
Another reason to be optimistic about Bitcoin’s long-term prospects is that it is increasingly integrated into the world economy. So, by investing in Bitcoin, you gain access to enormous global diversity. Currently, only a handful of countries like El Salvador fully embrace Bitcoin. However, strict Bitcoin bulls believe that cryptocurrency will eventually replace fiat currencies in the world’s financial system and that all nations will eventually trust Bitcoin in some way.
Ethereum (ETH)
Ethereum, just like Bitcoin, has delivered superior returns over its lifetime. What makes Ethereum so attractive to long-term investors is how much benefit it provides. While Bitcoin is primarily just an online payment option, Ethereum provides the blockchain infrastructure for developers to build apps, games, metaverse worlds, and just about anything you can imagine Web3 related. Ethereum has introduced the world to smart contracts, NFTs, and DeFi, so it deserves its reputation as an innovator.
You could also argue that Ethereum is now built for the long haul, given its recent technological upgrade. Before The Merge, Ethereum was relatively energy intensive, slow and inefficient. After the merger, Ethereum’s energy consumption is expected to drop by 99.9%, making it faster, more cost-effective and more efficient. Investors no longer need to worry about a new startup competitor knocking Ethereum from its top Tier 1 blockchain network position.
Binance Coin (BNB)
Finally, there is Binance (BNB), which currently has a market cap of around $50 billion. While many investors see Binance as the world’s largest cryptocurrency exchange, Binance is much more than that. Binance is a Tier 1 blockchain just like Ethereum and this means people can build on top of Binance just like Ethereum. This has resulted in the emergence of a popular stablecoin as well as a very vibrant blockchain ecosystem that includes apps, games and Web3 projects. Binance is known for developing new projects and new coins in the crypto world.
However, as we saw in the recent FTX (FTT) meltdown, Binance’s truly global reach to every aspect of the crypto world means it often encounters competitors and competitors in unexpected ways. In the case of FTX, it meant an epic showdown with former FTX Chief Executive Sam Bankman-Fried. In other cases, this means that Binance is sometimes at odds with national regulators and law enforcement, as with the ongoing US investigation into Binance for potential money laundering.
Based on advisory firm Binance’s extensive legal and regulatory risk, I’m somewhat skeptical that Binance will maintain its market-leading position for the next 20 years, therefore not recommending it as a long-term investment.
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