There are thousands of cryptocurrencies out there catering for a multitude of use cases. As those who have spent any time in the crypto space will know, some projects are more reputable than others, which impacts the trust placed in the tokens associated with those projects.
Cryptocurrency is, of course, also famous for its spectacular peaks and troughs, where coins can rocket 1,000% before losing those gains over the following months. There are many however who eschew the potential for these short term gains and simply sit on a select few coins for years and years, confident that over time they will produce a hefty financial reward. In a world where risk is a byword, holding onto coins for years is a very different type of risk.
The question is, what are these coins that are being held for years on end and what kind of gains can holders expect after a decade or so’s worth of sitting on their hands? To answer this question we look at the three coins that we feel offer the best investment potential in the cryptocurrency space.
When considering the best cryptocurrency for investment potential we need to strike a balance between price appreciation potential and risk. Any moon-chasing YouTuber can shill their favorite micro-cap coin that they think will do 1,000x, but those projects are high risk investments that more often than not don’t pay off in the long term, for a number of reasons. We can therefore only consider cryptocurrencies that are well established in the space and that generally have a good reputation.
We also need to consider projects with a use case that will continue into the future. We’re thinking long term here, so we won’t be picking coins with an unproven use case or projects whose premise is insubstantial or scammy.
The issue here is that well established coins with genuine use cases have usually lived through several crypto cycles. While this has made them battle hardened, it also means that they have seen several rounds of price increases. This in turn means that they won’t net you your 1,000x, but they are more likely to be the coins that in 5-10 years are still standing and have still appreciated enough to get you a step or two closer to retirement.
With that understood, let’s get started.
The grandfather of the crypto space and the one that started it all. Bitcoin is the cryptocurrency version of the war veteran – they have seen and done it all, and they’re still going strong. You probably know Bitcoin’s origin story so we won’t go through that here, but what we do need to look at is what its use case is now it’s entering its teenage years.
Initially Bitcoin didn’t really have a use case as such, it was just a new decentralized form of money that could be put to a number of uses. Initially these uses were nefarious, such as on Silk Road, but over time Bitcoin has become more enmeshed with the traditional stock markets, with its fixed supply and controlled emission being attractive to those looking for a place to put their fiat money in times of rapid money printing and high inflation.
Bitcoin’s use case is now very much that of a form of digital gold, a scarce resource that is understood to be an alternative to traditional investments.
As we have seen in El Salvador, the Lightning Network is also allowing it to become the payment system it was once envisioned to be, which adds another string to its bow, but at its core Bitcoin is seen as an antidote to the actions of central banks, which is one of the reasons why central banks and governments don’t like it. This use case shows no signs of diminishing, and in fact is likely to only strengthen as central bank policy increases national debt year on year.
When it comes to Bitcoin’s investment potential, there is no doubt that the best gains have already been made. Bitcoin shot from $1,200 in January 2017 to $47,000 in January 2022, and with a market cap now in the trillions we can’t expect those kinds of numbers again, at least not as quickly. Bitcoin’s growth will reduce over time as its market cap grows, yet predictions of anything from $150,000 to $1 million per Bitcoin still routinely do the rounds.
Of course, we can’t put a solid number out there, but given Bitcoin’s performance and resilience to date, plus its use case being brought ever sharper into focus, it’s no stretch to say that six figure Bitcoin is a relatively safe bet in the long term.
There are caveats to this, however. Bitcoin’s impact on the environment has become the subject of global headlines in recent years, and with more and more focus being placed on ESG commitments there is a concern that mining operations could be strangled to the point of unconsciousness if it doesn’t adequately address them.
There is also the prospect of other countries following China’s lead and banning Bitcoin, or at least taxing Bitcoin trading out of existence, but countries (at least non-authoritarian ones) are starting to realize that the cat is out of the bag now, and the chance to ban it has gone.
Banning something, especially something now as universal as Bitcoin, often only results in its use going underground, and talk of effective regulation is much more common these days than talks of nationwide bans.
Once these regulations are in place, expect Bitcoin to become very tempting for institutions that have so far stayed clear, with the obvious impact to its price.
If Bitcoin is the horse everyone has been betting their money on for the last decade or so, Ethereum is the dark filly haring up the inside and threatening to pip it to the post. The platform, launched in 2015, invented the concept of smart contracts and underpins the entire decentralized movement, including multi-billion-dollar behemoths like DeFi and NFTs.
Ethereum overtook XRP to become the second placed cryptocurrency in terms of market cap in February 2016 and it has stayed there ever since, with a market cap now in the hundreds of billions. Each new movement in the crypto space, from ICOs in 2017 to NFTs today, has used Ethereum as its base, with thousands of projects starting off on Ethereum before moving to their own chain.
Ethereum-based DeFi projects have tens of billions of dollars locked up on them, which speaks to the amount of trust that project creators have in Ethereum.
Ethereum’s resilience and security has been proven over time, while its completely decentralized nature is the reason why so many projects call it home.
It has also proved that it can move with the times, with crypto visionaries almost always building their projects on Ethereum first, whatever the new craze.
Ethereum is a different beast to Bitcoin in that it is a platform on which to build as opposed to a form of money, but it has likewise proven itself to be both resilient enough to withstand attacks (the last hack was in June 2016) but flexible enough to keep up with the latest trends in the fast moving crypto space, despite newer and more agile blockchains entering the space.
Ethereum has recently become a favorite among institutional investors who rightly see the potential in the DeFi and NFT movements as being beneficial for the blockchain.
Targets of $10,000 per ETH token are widespread, and with the coin having hit $4,800 in November 2021 this might prove to be a low target, especially if it continues to be the home of new crypto innovations.
One big caveat to Ethereum’s success is its ongoing upgrade. Ethereum is overhauling the entire blockchain and moving from the environmentally damaging proof-of-work mining as undertaken by Bitcoin to the more ESG friendly (but arguably less secure) proof-of-stake.
The upgrade will see the blockchain increase in speed dramatically, ensuring it keeps up with its competition, while the currently astronomical fees will be drastically cut. It will also see the ETH token become deflationary, which is a huge economic feather in its cap.
In a huge show of faith, to date crypto users all round the world have sent a combined 9.4 million ETH, worth $27 billion at the time of writing, to the Ethereum 2.0 staking wallet in order to book their place as an Ethereum staker, which is an important part of the proof-of-stake protocol. This is despite there being no telling when this might be or if it will even work.
If Ethereum can pull off this upgrade then the debate of five-figure ETH will be replaced with an argument of exactly which five figures it can reach. If, however, the upgrade process presents too many stumbling blocks, drags out for too long, or fails completely, then the Ethereum holder’s nightmare of those thousands of projects abandoning ship for other blockchains will come true, and the price will tank as a result.
USD Coin/Binance USD/True USD
It may seem a strange choice to use a stablecoin when considering a long-term investment, but the reason for this isn’t as odd as you might think. Firstly, when it comes to other cryptocurrencies in the space after Bitcoin and Ethereum, it really is much of a muchness.
How could we choose between, Solana, Avalanche, Dogecoin, or Smooth Love Potion? There are no other single candidates that are at the same level as Bitcoin and Ethereum when it comes to the combination of reliability, reputation, and use case.
When we look at stablecoins, however, we can start to fill this gap. While the coins themselves may be relatively new, what’s backing them is the US dollar, the history and global prowess of which needs no explanation.
There is a reason why we have chosen these three stablecoins in particular and not the likes of Tether (USDT) and DAI; each USDT token is only fractionally backed by cash, while DAI is pegged to a basket of cryptocurrencies. USDC, BUSD, and TUSD are backed by real dollars in a real bank account which are regularly audited.
One of the reasons why stablecoins like USDC, BUSD, and TUSD might make for good long term investments is because, in the grand scheme of things, a dollar is always worth a dollar. This means that, whereas Bitcoin and Ethereum suffer from both positive and negative volatility, these stablecoins won’t.
In times of recessions and market turmoil they will hold their value, and that can mean the world of difference, especially in times of global crisis or in a crypto bear market.
The other reason why these coins make a better investment option than holding regular dollars is interest. Ever since the financial crash of 2008, interest rates in the traditional banking world have been ludicrously low. This means that savers have very little incentive to keep their dollars in their bank accounts as opposed to, say, buying bitcoin or ethereum.
Inflation has also risen dramatically in recent years and interest rates haven’t kept up, meaning that you are actually losing money by holding it in your bank account, no matter what their interest rate.
However, if you were to stake your USDC, BUSD, and TUSD on any of the DeFi platforms out there, you could receive an interest rate over 100 times higher than your bank account currently offers – up to 8% in some cases. Therefore, if you’re a high roller and you’re looking for a low risk, high interest play, staking USDC, BUSD, and TUSD is a great option, especially if you’re able to compound those gains over the years.
Of course, the caveat with stablecoins is that you’re not going to get the kind of gains you might with Bitcoin or Ethereum – nothing like it. Also there’s the fact that the spending value of the U.S. dollar has decreased massively over time, so in real terms you could be missing out too.
Choosing stablecoins is at the lower end of the risk/reward scale, but it is nevertheless one of the areas of the cryptocurrency investment world that outshines what can be achieved in the traditional finance world.
And the winner is…
Now we’ve examined our three options for the best cryptocurrency investment, it’s time to pick a winner. Given how different Bitcoin and Ethereum are to the stablecoin investment strategy, we will choose between Bitcoin and Ethereum first and pit the winner against stablecoins.
As the biggest and oldest cryptocurrency in the playground, Bitcoin clearly has huge advantages, with institutional admirers falling under its spell on an almost monthly basis.
Ethereum on the other hand is the home of potentially the biggest financial revolution of modern times and is in the middle of an upgrade that could transform its global appeal while also making it a deflationary asset.
It is for these reasons that we think Ethereum has the edge over Bitcoin when it comes to long term returns. To put it bluntly, Ethereum is earlier in its development than Bitcoin and its scope of operations is expanding more than Bitcoin’s is, so the gains to be had are higher than those that will be achieved by holding Bitcoin alone.
Ethereum’s upgrade will likely be the catalyst to these higher gains, which, crucially, we believe will be successful.
We then move onto comparing Ethereum with USDC, BUSD, and TUSD. What’s tricky here is that the two are on almost opposite ends of the risk/reward spectrum – at one end is a steady compounding interest that knocks traditional savings out of the park and beyond, while at the other end is a platform that could help revolutionize global finance and the dollar itself.
There is of course a temptation to stake a bunch of stablecoins and watch them compound year on year, knowing that you’re beating the banks with the same currency underpinning it, but we can’t overlook what Ethereum is plotting and the impact it could have.
The Ethereum team have so far tackled the early stages of the upgrade flawlessly and there are no current concerns that the bigger hurdles that lie ahead won’t also be cleared in time. This confidence is reflected in the fact that $27 billion worth of ETH has been submitted to the Ethereum staking wallet in a frankly sensational show of support.
If this were a smaller or less well established project then we wouldn’t have such faith, but this is the second biggest cryptocurrency in the space with a market cap in the hundreds of billions of dollars.
Ethereum’s reputation and resilience, the fact that it is home to the multi-billion-dollar DeFi movement and more, plus its imminent upgrade and potential to be a deflationary asset, all explain why institutions are getting very excited about Ethereum and making it their next investment after Bitcoin.
It also explains why Ethereum is the cryptocurrency we feel represents the best investment potential.