‘Crypto Investing: High Risk, But These 2 Cryptos Offer Long-Term Potential’
Bitcoin and Ethereum: The Cryptos With Long-Term Potential Despite Market Volatility
The recent downturn in the cryptocurrency market has been nothing short of alarming. In a single 24-hour period, the market saw $367 billion in value evaporate. During this time, Bitcoin (BTC) plummeted by 15%, while Ethereum (ETH) dropped by 22%. It’s not just the magnitude of the losses that has shaken investors, but also the speed at which they occurred.
However, despite this volatility, Bitcoin and Ethereum remain the two cryptocurrencies that still inspire confidence in 2024. Both have stood the test of time, having been around for more than a decade, and have provided extraordinary returns to investors over the years. Let’s delve into what makes these two digital assets unique.
Bitcoin: The Digital Gold Standard
Bitcoin continues to hold its position as the benchmark for cryptocurrency investors. Often referred to as “digital gold,” Bitcoin shares several key characteristics with physical gold. Most notably, Bitcoin has a finite supply of 21 million coins. With nearly 20 million coins already in circulation, we are approaching a point where the vast majority of Bitcoin that will ever exist has already been created. This scarcity is a key reason why many investors now treat Bitcoin as a valuable asset, akin to gold.
More than any other cryptocurrency, Bitcoin is supported by a strong, long-term investment philosophy. The mantra of Bitcoin holders is simple: Never sell your Bitcoin. This has given rise to popular terms like “HODL” and “Diamond Hands,” which symbolize the steadfast commitment of Bitcoin investors to hold on to their assets regardless of market conditions.
It might surprise some to learn just how many Bitcoin investors are in it for the long haul, especially given the frequent news about short-term speculators. As of mid-June, data from Glassnode indicated that nearly 14 million bitcoins were held by long-term investors. This often-overlooked aspect of Bitcoin highlights its enduring appeal. The increasing interest from institutional investors only strengthens this buy-and-hold mentality among smaller retail investors.
Finally, it’s impossible to ignore Bitcoin’s resilience over the years. According to Cathie Wood of Ark Invest, Bitcoin has endured at least five significant declines, each seeing the price drop by 77% or more. Yet, Bitcoin has bounced back each time. After its sharp decline in November 2021, for example, Bitcoin quickly rebounded. In 2023, Bitcoin surged by more than 150%, and in 2024, its price is up by 30%.
Ethereum: The Digital Silver With a Vast Ecosystem
While Bitcoin is often likened to “digital gold,” Ethereum is frequently referred to as “digital silver.” Although it may not receive as much attention as Bitcoin, Ethereum is a key focus for many investors seeking stability in a volatile crypto market.
One of Ethereum’s biggest strengths is its extensive and diverse blockchain ecosystem. This ecosystem gives Ethereum a level of diversification that is unparalleled in the crypto world. For traditional equity investors, it might be helpful to think of Ethereum as a blockchain conglomerate that does a bit of everything. As a Layer 1 blockchain, Ethereum serves as the foundation upon which developers can build new products and services, ranging from new crypto tokens to decentralized finance (DeFi) platforms.
This broad range of applications and its massive global developer community make Ethereum a valuable hedge against uncertainty in the crypto market. If one area of the blockchain industry underperforms, another may be thriving, helping to balance out the overall performance of Ethereum. This level of diversification is something that more niche cryptocurrencies simply can’t offer.
Moreover, Ethereum excels in nearly everything it does. Despite the emergence of several competitors aiming to dethrone Ethereum as the leading Layer 1 blockchain, none have succeeded. For instance, in the DeFi space, Ethereum continues to dominate, holding a commanding 60% share of Total Value Locked (TVL), a key metric for measuring DeFi activity. This market dominance is why many investors are willing to pay a premium for Ethereum.
A Long-Term Investment in Bitcoin and Ethereum
Together, Bitcoin and Ethereum now make up an impressive 70% of the total cryptocurrency market capitalization. This dominance is likely to continue growing, especially as these are the only two cryptocurrencies with their own spot ETFs, making them more accessible to both retail and institutional investors. Despite current market conditions, money is expected to keep flowing into these two digital assets.
Over the long term, few other cryptocurrencies can match the proven track records of Bitcoin and Ethereum. Both have solidified their positions as market leaders with strong growth potential. While investing in cryptocurrency always carries risks, Bitcoin and Ethereum have consistently demonstrated their ability to recover from market downturns, making them reliable additions to any crypto portfolio.
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