Best Long-Term Crypto Investments

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Contributor, Benzinga
January 18, 2023

Want to jump straight to the best long-term crypto investments? Bitcoin and Ethereum are the clear frontrunners and are both available to trade on Uphold, Robinhood, Coinbase, eToro, WeBull and Crypto.com.

Cryptocurrency is a high-risk, high-reward investment class that has the potential to generate life-changing wealth. It represents a revolutionary shift from centralized to decentralized financial systems and has skyrocketed in value, popularity and complexity in the 21st century. 

However, not all cryptocurrencies are made equal. Most will die in the long run, which will leave a few projects that reap all the rewards. Picking winners is an art within the crypto sector – the ultimate key to survival and long-term success.

The following article will explore the value behind cryptocurrency, the rationale for investing in cryptocurrency and two specific cryptos that are likely to dominate in the long-term.

Disclosure: eToro supports the following currencies: BTC, ADA, DASH, DOGE, EOS, ETH, LTC, NEO, XLM, XTZ, TRX, ZEC. eToro USA LLC; Investments are subject to market risk, including the possible loss of principal. T&Cs apply. *The bonus is available to Benzinga readers in the US for open states only. Served by eToro USA LLC.

Why Invest in Cryptocurrency?

To understand why the cryptocurrency market is full of lucrative investment opportunities, you must first learn why it was created and what it stands for. This story begins with Bitcoin – the original cryptocurrency.

The Origin

Amid the chaos of the 2008 financial crisis, Bitcoin was born out of a need for decentralization. Satoshi Nakamoto, whose true identity remains unknown, published a whitepaper outlining a new way of handling money without the need for central authorities. This revolutionary concept was created in response to the growing mistrust of traditional financial institutions and the reliance on centralized power.

The purpose of Bitcoin was to bypass the middleman in financial transactions, reducing costs,  improving efficiency and increasing financial accessibility. Over time, more cryptocurrencies have emerged, each of which solves new problems with an emphasis on decentralization.

Does Crypto Have Value?

Ok, so you understand the origin. The next step is to attack perhaps the biggest question asked by investors: why does crypto have value? 

The intrinsic value of cryptocurrency is reflected by its convenience of exchange and transaction advantages compared to other currencies if it were to become widely adopted. This is known as a convenience yield — a concept that is empirically sound for cash-like assets.

A common example of the convenience yield at play is the decision to keep money in a bank account, despite the fact that the interest rate offered by the bank may be lower than other investment options such as Treasury bills or AAA corporate bonds.

Crypto’s convenience yield is multifaceted. On one hand, cryptocurrency was created to be a hedge against inflation, seigniorage and failing monetary policy. It operates independently of central banks, relying on complex algorithms and decentralized governance instead. Additionally, cryptocurrency is designed to be more efficient, decentralized and capable of handling a larger volume of transactions. As a result, it has the potential to outperform traditional fiat currencies in terms of convenience, efficiency and reliability.

Note, this is a simplified explanation. The value of each crypto reflects the platform or exchange it is built on top of – each of which offers differentiated value propositions as explored further in the article.

High Risk, High Return

The value of cryptocurrency is known to fluctuate wildly, making it a potentially risky investment. However, risk is not a definitive measure of success or failure. Whether high-risk investments are right for an individual investor depends on their goals, risk tolerance and overall financial strategy. 

After its recent surge to $60,000 in late November 2021, Bitcoin became the best-performing asset of the decade – beating all stocks, commodities and other forms of asset-based investments. However, a key caveat to using Bitcoin to measure the return of cryptocurrency is survivor bias (the tendency to ignore coins that have died out). Most altcoins (cryptos that aren’t Bitcoin) die out in the long run. 

Given cryptocurrency’s speculative nature and uncertain regulatory future, it is best practice to only invest money you are willing to lose. Cryptocurrency can be a great hedge for a balanced portfolio, offering tremendous upside potential without requiring significant capital investment. 

Best Long-Term Crypto Investments

In the vast sea of cryptocurrency, it can be challenging trying to find value. So many projects exist, each with unique use cases and shiny roadmaps. However, the sad truth is that the overwhelming projects will wither away in the long run – leaving a handful of winners that take all the glory. 

With each subsequent bull run, new and innovative coins emerge that offer unique and improved use cases. As a result, choosing a winner is akin to picking a needle in a haystack – a risky gamble at best and a delusion at worst. Recent data by CoinMarketCap indicates that over 20,000 cryptocurrencies are available on the market. This number likely falls in the low range. Thousands of coins never picked up enough steam to be listed on the site.

However, the good news is that this cycle of replacement doesn’t apply to all cryptocurrencies.  Throughout cryptocurrency’s history, two cryptocurrencies have stood the test of time through multiple boom and bust cycles – Bitcoin and Ethereum.

Bitcoin and Ethereum are established winners – the cornerstone of the crypto narrative and indisputably the best long-term investments in cryptocurrency. While this doesn’t mean that Bitcoin and Ethereum are guaranteed to survive in the long term, they offer the best risk-to-reward ratio for investors without a crystal ball.

Bitcoin

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Many individuals refer to Bitcoin as a speculative store of value, but this explanation is a simplistic representation. 

Bitcoin offers a glimpse into a hopeful future of financial equality, where the rules of the game cannot be swayed by the selfish desires of individuals or governments. It's not just a tool for everyday transactions, but a catalyst for unifying the world through a transparent and incorruptible form of currency. Bitcoin operates as a means for paving the way toward a more fair and just global economy.

As the world's most decentralized and widely-recognized cryptocurrency, Bitcoin has cemented its place as a leader in the market – Bitcoin possesses over 40% market share in the crypto industry. Its anonymous creator, organic growth and rigorous testing have also contributed to its merit-based success. In the world of cryptocurrency, Bitcoin stands out as the most secure and proven option.

What Does Bitcoin Do?

The easiest way to think of Bitcoin is as digital gold. Like gold, it is an immutable, perfectly scarce, non-sovereign, divisible savings technology with a hard-cap supply. However, it improves off gold through its portable nature. Gold needs to be mined and transported; Bitcoin can be sent anywhere in the world at any time in a matter of minutes.

In this way, Bitcoin is virtually a super commodity – by no means perfect  – but a fantastic alternative to inflationary fiat currencies. 

Delving deeper, Bitcoin is a Layer 1 blockchain, a type of project that represents the base network or underlying infrastructure in a blockchain-based financial system. Layer 1 blockchains are the backbone of decentralized ecosystems, capable of operating without the need for another network.

Bitcoin, like other cryptocurrencies, uses a technology called blockchain to help secure its transactions. Blockchains are decentralized, digital ledgers that keep track of the origin and movement of digital assets.

Ethereum

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Right at the forefront of cryptocurrency alongside Bitcoin is Ethereum – the second-largest cryptocurrency by market capitalization and the largest altcoin in the industry. Ethereum was founded by Vitalik Buterin and Charles Hoskinson, among other founders in 2013. 

Despite often being compared to each other, Ethereum and Bitcoin are not competitors – they complement each other. Comparing Ethereum to Bitcoin is like comparing apples to oranges. They both serve different purposes within the crypto industry.

How Does Ethereum Work?

Ethereum can be thought of as a massive, global computer network that exists across thousands of devices around the world. It's not bound to a single machine but rather runs concurrently on a network of devices. People all over the globe contribute their own computing power to keep the network secure and are rewarded in Ether (ETH) for their efforts. ETH is the cryptocurrency native to Ethereum, functioning as the driving force behind the network. It can be thought of as the fuel that keeps the network running smoothly.

The purpose of Ethereum is to allow developers to create and launch decentralized applications (dApps) that run across a decentralized network instead of a centralized server. These dApps serve a wide range of applications, from decentralized finance (DeFi) to NFTs to gaming – the use cases are endless. 

Like Bitcoin, Ethereum is a Layer 1 blockchain. However, while Bitcoin is designed to be a slow and inflexible fortress to maximize security, Ethereum is flexible and allows for a greater degree of programmability. This is the key distinction between Bitcoin, which is a first-generation blockchain and Ethereum, which was the world’s first second-generation blockchain. 

Although Ethereum has many competitors such as Binance Smart Chain and Solana, it dominates by a long shot. Within the programmable blockchain sector, Ethereum is the market leader. It is home to over 50% of the liquidity that exists on all blockchains and has the largest ecosystem of developments, dApps and partnerships. 

Top Gainers:

Take a look at a few of this week's top gainers in the crypto market, curtesy of Altfins, a must-have tool for anyone involved in crypto trading.

Where to Buy Cryptocurrency

Bitcoin and Ethereum can be purchased on centralized exchanges such as Crypto.com, WeBull and eToro. Before you proceed to buy either Bitcoin or ETH, be sure to research and compare your options to find a trustworthy source that meets your needs. Important considerations include the fees, trading features, security measures and regulations associated with each cryptocurrency. 

How to Store Cryptocurrency

The most common way to store cryptocurrency is through the use of a crypto wallet. Unlike a traditional wallet that physically safeguards your assets, crypto wallets do not hold your coins, but rather, the private keys to your coins.

Instead, your cryptocurrency lies on the blockchain, and your wallet is the means by which you access and manage them. You can choose from two types of crypto wallets: software and hardware wallets. Software wallets store your private key online and are an easy and convenient way to manage your crypto. They can be accessed through a variety of mediums such as web browsers, apps or a desktop – all that is needed is an internet connection. 

Conversely, hardware wallets are physical devices that store your private keys offline. This feature makes them safer than software wallets as they are immune to cyber attacks such as phishing and other forms of hacking. Generally speaking, hardware wallets are the gold standard of secure crypto storage. However, hardware wallets aren’t always the best wallets for everyone because of their inflexibility.

Best Hardware Wallet – Ledger

Ledger is the leader in the global hardware wallet industry, boasting the Ledger Nano X, Nano S Plus and Stax hardware wallets. The company is trusted by millions of users worldwide and provides users with a secure and user-friendly experience. The Nano X and Nano S Plus are both phenomenal options, supporting over 1,000 different tokens with state-of-the-art security. Ledger wallets support tamper-resistant Common Criteria (CC) EAL5+ certified Secure Element (SE) chips on all nanodevices, providing incredible security. 

The Stax, Ledger’s newest wallet, is an innovative model that uses the world's first curved E Ink touchscreen. It is a great option for savvy investors who want to manage day-to-day transactions in comfort.

Pros

  • Hardware wallets can provide you that extra layer of confidence you need
  • This is a classic way to store crypto and could be helpful for those who are deeply concerned about online security

Cons

  • You may feel as though you need a software wallet in some cases, and that is alright. Choose according to your needs

Best Software Wallet - ZenGo

ZenGo is the only self-custodial software wallet in the world without a private key. Why is this important? It means that users can rest easy knowing that they don’t have to remember a complex seed phrase. Instead, ZenGo supports three-factor authentication (3FA) to ensure ultimate security. 

ZenGo has received high ratings from users worldwide, with an average rating of 4.8 on both the App Store and Google Play. Many people have had positive experiences with ZenGo, which is known for being user-friendly and versatile. 

Pros

  • A software wallet is often much easier to manage
  • Those who are passively investing in crypto can grab a software wallet and easily use it without physically needing to store it

Cons

  • Yes, the platform is secure, but some people could get turned around by three-factor authentication

So, Is Crypto a Good Long-Term Investment?

The world of cryptocurrency has the potential to deliver substantial returns, as demonstrated by Bitcoin and Ethereum. The number of people investing in cryptocurrency has risen steadily and in recent years has seen a significant increase, even among institutional investors. 

However, it's important to recognize that investing in cryptocurrency comes with its fair share of risks. Cryptocurrency is highly speculative, and it is unclear what the implications of future regulations will be. It could reshape how financial systems operate on a global scale; however, only those who are willing to brave the potential ups and downs of the market should consider diving in.

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts
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