If you think about it, the “ultimate” cryptocurrency would deliver market-beating returns with incredible stability, serve as a long-term store of value, be widely accepted around the world, and gain approval from government regulators. Probably. And buying and selling is so easy that anyone can do it without advanced knowledge of how cryptocurrencies work.
Of course, that’s a lot of questions, but the only cryptocurrency that pretty much meets all these conditions is: Bitcoin (BTC -1.16%). As we’ll discuss below, Bitcoin may have the ultimate risk-reward profile of any cryptocurrency available for purchase today.
Bitcoin’s track record of delivering superior returns
Let’s start with Bitcoin’s amazing returns. Since 2013, Bitcoin has risen an astonishing 40,000%. For a decade from 2011 to 2021, Bitcoin was the world’s best-performing asset, but it wasn’t even close. Bitcoin returned nearly 10 times as much as its closest competitor, the tech-heavy Nasdaq 100.
Bitcoin certainly had a dire 2022, losing nearly 65% of its value, but it rebounded in 2023 and once again became the world’s best-performing asset class. Then again, Bitcoin is up over 150% for the year, and it wasn’t even close. While past performance is certainly no guarantee of future profits, even the biggest skeptics have to admit that Bitcoin has amassed an impressive track record over the past decade.
Bitcoin as a store of value
From an overall risk-reward profile perspective, Bitcoin continues to serve as a long-term store of value for investors. In short, that means Bitcoin thrives in both inflationary and deflationary economic environments. This also means that investors are likely to view Bitcoin as a “safe” asset during times of peak economic uncertainty. We saw this in early 2023, when a series of local bank failures led investors to move their funds into Bitcoin.
Throughout its history, Bitcoin has often been referred to as “digital gold,” and for good reason. The total lifetime supply of Bitcoin is limited to 21 million coins. This creates a true scarcity effect on the market, especially since he has 19.6 million coins already in circulation.
Conceptually, this is a bit like thinking about the world’s physical gold supply. At some point, the world’s gold miners will run out of gold to mine. The same applies to Bitcoin. Once the coins reach 21 million, there is no magical central bank that will create more Bitcoins.
Additionally, the rate at which new Bitcoins are created is carefully controlled by algorithms. Since the rate of new supply falls by a factor of 2 every four years, we see that Bitcoin actually becomes more deflationary over time. That’s exactly what you want to see as an investor looking for a hedge against inflation.
How do you invest $1,000?
So what’s the best way to invest $1,000 in Bitcoin? Until January of this year, the answer was to go to a major crypto exchange, sign up for an account, and buy Bitcoin for your account. It was to buy. While $1,000 isn’t enough to buy an entire Bitcoin (worth $40,000 at current prices), you can buy fractions of Bitcoin. In your account, this will appear as 0.025 BTC.
However, on January 10th, the Securities and Exchange Commission finally approved nearly a dozen new spot Bitcoin ETFs. These will allow you to purchase Bitcoin through the traditional his ETF structure. Currently, the two most popular ETFs among investors are: iShares Bitcoin Trust (NASDAQ:IBIT) And that Fidelity Wise Origin Bitcoin Fund (NYSEMKT:FBTC).
They are popular because they have near-zero expense ratios (0.25%) and are backed by two of the world’s largest investment firms. black rock (New York Stock Exchange: BLK) and Fidelity Investments. For $1,000, you can buy about 50 shares of the BlackRock ETF or about 30 shares of the Fidelity ETF.
Bitcoin for the long term
As outlined above, Bitcoin offers the best combination of risk and return of any major cryptocurrency. Bitcoin is by no means a “safe” asset, but it does have certain unique properties that make it much more secure than competing cryptocurrencies. We also have a strong track record of delivering superior returns for over a decade. Therefore, I plan to continue buying and holding Bitcoin for the long term. At this point, I can’t think of a better way to invest his $1,000 in cryptocurrency.