Cryptocurrencies have had a radical impact on the financial markets since they rose to prominence in 2017.
Crypto disrupts traditional economic systems by providing a digital alternative for wealth transfer and storage – cryptocurrencies effectively removing the need for a middleman (bye-bye banks and financial institutions).
When combined with digital financial products, like eWallets and crypto exchanges, decentralized currencies offer a popular way for individuals to diversify their investments and even hedge against inflation.
One of the most exciting things about cryptocurrency is just how diverse the sector has become.
Cryptos and other digital assets have been integrated into so many different spaces like retail, digital banking, or even online gaming, where players can click here to play with BTC on iGaming platforms or earn NFTs in P2E titles.
This varied application – among other aspects – makes crypto subject to such dramatic increases in value.
However, the market is also subject to rapid crashes, as demonstrated in the winter of 2022. Does this mean that crypto finance is merely a passing fad? Let’s find out.
A Volatile Asset
It’s no secret that cryptocurrency is a very volatile asset, and, like all volatile assets, investing in it requires methodical strategies and a disciplined approach.
You may have read the stories of crypto investors who’ve been on the receiving end of tremendous profits over the years, but equally, some have faced tremendous losses too.
Getting rich with crypto finance isn’t going to happen overnight, as is the case with any investment model.
Still, it can present great opportunities for those who understand how to mitigate risk.
All of this starts with knowing which cryptocurrency/ies to invest in. As of 2023, there are now over 10,000 decentralized currencies in existence, making it essential to do your research.
The market is also largely unregulated, so there’s no way of guaranteeing the longevity of a new crypto project.
To manage the risks of investing in crypto, the best tokens to invest in are Bitcoin, Ethereum and Polygon.
The Best Tokens To Invest In
At a glance:
- Bitcoin (BTC) is now the most widely accepted cryptocurrency, with some predicting it to be the future of money.
- Ethereum (ETH) is a token with great utility and has the highest number of real-world cases of any crypto.
- Polygon (MATIC) is a newer token, but it’s already been at the forefront of notable innovative applications.
The “digital gold” of cryptocurrencies, Bitcoin should be the starting point for anyone looking to add long-term crypto investments to their personal finance portfolios.
Bitcoin currently holds a market capitalization of roughly 45% of the entire cryptocurrency market.
While no crypto is a guaranteed profitable buy-and-hold investment, it’s demonstrated remarkable stability in the face of market fluctuations.
Throughout its 14-year existence, Bitcoin has experienced several significant market crashes, including a severe drop in 2011 when its value plummeted to just $0.01 in a matter of days. Nevertheless, it’s recovered stronger each time.
One popular opinion of Bitcoin is that its destined to become “the money of the future”.
Proponents of this idea argue that as time progresses, Bitcoin will gain more significance as a means of payment in the digital realm.
Prominent figures in the tech industry, such as Silicon Valley venture capitalist Tim Draper, have expressed the belief that Bitcoin will eventually be used for all online transactions, potentially propelling its value to over $250,000.
Another cryptocurrency with impressive long-term endurance is Ethereum, which holds a market capitalization equal to approximately 20% of the entire crypto market.
Unlike Bitcoin, which primarily serves as a store of value and a means of online payment, Ethereum offers much more in terms of functionality and practical applications.
In 2015, Ethereum introduced the concept of smart contracts; since then, its been at the forefront of advancements in decentralized finance, gaming, the metaverse, and digital assets like non-fungible tokens (NFTs).
Following its transformation into a faster and more energy-efficient blockchain due to The Merge, Ethereum is now better positioned than ever to become the top Layer 1 blockchain.
Founder Vitalik Buterin has already developed an ambitious long-term plan for the blockchain, which could see it process up to 1 million transactions per second.
This would make Ethereum more powerful than today’s credit card networks, which can only handle 24,000 transactions per second.
The third and final recommended token for long-term crypto financial investment is Polygon, which has recently climbed into the top 10 cryptocurrencies by market capitalization.
Central to Polygon’s success is its ability to generate innovative blockchain technology use cases.
For instance, Polygon has established partnerships with several prominent companies, including Walt Disney, with the objective of exploring new applications in the entertainment industry.
It has also collaborated with Starbucks on a Web3-based customer loyalty program and with Meta Platforms to bring non-fungible tokens (NFTs) to the masses by making them accessible to billions of social media users globally.
The core appeal of Polygon is its ability to scale Ethereum. By building upon the security and reliability of the ETH network and incorporating its own advanced technology, Polygon bundles transactions and offers exceptional performance to users.
Buterin has even lauded Polygon’s “truly amazing” scaling technology, and it also has the potential to grow at a faster rate than Ethereum itself.
Building A Crypto Portfolio
Building a long-term, viable crypto portfolio involves ensuring that your cryptocurrency investments are appropriately balanced with your overall investment portfolio.
Given the high-risk nature of cryptocurrency, it’s advisable to limit crypto investments to a small percentage of your overall portfolio – typically between 5 and 10% at most.
When deciding on which cryptocurrencies to invest in, considering their various use cases can be beneficial.
For example, you may want to invest in a mixture of payment coins, gaming coins, privacy coins, or even blockchain DeFi and Metaverse platforms.
Whichever way you decide to balance your crypto assets, prioritize investing in one or two of the coins mentioned above.
Perhaps you’ll allocate two-thirds of your funds to buy Bitcoin and Ethereum and use the remaining third to invest in more diverse crypto assets that appeal to you.
While no cryptocurrency investment can be considered entirely safe, Bitcoin, Ethereum and Polygon are the closest to being safe.
BTC and ETC, in particular, are the market’s mainstays, making them more likely to be around for the long haul.
Remember that there may be times when you’ll need to sell some of your cryptocurrency investments if their value appreciates significantly.
A portfolio that’s too crypto-heavy, coming in at 25% to 50% of the value of your total investments, could expose you to significant risks in the event of a market downturn.