The Ultimate Cryptocurrency to Buy With $1,000

If you’re looking to invest $1,000 working the crypto market right now, you’re probably looking for a cryptocurrency with significant upside potential. And given the current macroeconomic uncertainty, you’re probably looking for some measure of downside protection as well.

The search for a crypto investment that has both upside potential and downside protection may seem a bit quixotic, but there is actually a cryptocurrency that offers both. Yes, Bitcoin (CRYPTO: BTC). If I had $1,000 to invest right now, this would be my top crypto pick.

Bitcoin’s upside potential

Some analysts now predict that Bitcoin could reach a price of $100,000 by the end of this year and $150,000 by the end of 2025. Given Bitcoin’s current price of $63,000, this means you could potentially double your original $1,000 investment in just 18 months.

And if you look at Bitcoin from a longer-term perspective, the picture becomes even more compelling. Bitcoin could reach a price of $1.48 million by 2030, according to Cathie Wood of Ark Invest. He says that if all goes as planned, Bitcoin could reach a price of $3.8 million. So we’re talking about the potential to earn 25x or even 50x on your initial investment!

This kind of price performance may sound a bit fantastical. However, if you consider the historical background of Bitcoin, it is not so. It has been the world’s best-performing asset for most of the past decade and has not even come close to that value.

For example, in the decade from 2011 to 2021, Bitcoin posted annualized returns of 230%. The next closest asset class (high-growth tech stocks) posted returns of just 20% per year. Granted, past results are no guarantee of future performance, but there is now a solid body of evidence showing that Bitcoin has tremendous upside potential over a relatively long period of time.

Bitcoin’s downside protection

Bitcoin’s biggest strength in terms of downside protection is that it is an inflation-resistant asset. This is due to the algorithm that carefully controls the rate of new Bitcoin creation. Every four years, the rate of new Bitcoin creation decreases by half as a result of the halving. That’s why Coinbase Global now calls Bitcoin a “programmatically disinflationary asset.” So, if your main concern is inflation, then Bitcoin should be an attractive option.

Image source: Getty Images.

At the same time, Bitcoin, like a precious metal, has extraordinary scarcity. Many investors call Bitcoin “digital gold” for good reason. Bitcoin’s maximum lifetime supply is limited to 21 million coins, with 19.7 million coins currently in circulation. As worldwide adoption of Bitcoin increases, the impact of this scarcity on the price will also increase.

The story continues

And there’s another factor that gives Bitcoin downside protection: It’s still largely uncorrelated with other financial assets. In other words, Bitcoin may zig as other financial assets weaken. Therefore, even if the stock market falls, there is still a possibility that Bitcoin will not fall. This makes Bitcoin a very useful tool for portfolio diversification.

In fact, due to this lack of historical correlation, a growing number of investors now view Bitcoin as a safe haven that can help them avoid the slings and arrows of extreme luck. A big reason for this lack of correlation is that until recently Bitcoin was largely ignored by Wall Street and remained outside the traditional financial system.

The ultimate blend of risk and reward?

Of course, Bitcoin is not immune from risks. There’s no such thing as a free lunch, as they say on Wall Street. And Bitcoin exposes you to tremendous volatility. In a single 24-hour period, Bitcoin can rise or fall by 10% or more. Given that Bitcoin is traded around the world 24/7, you could theoretically go to bed thinking you’re a millionaire and wake up the next morning to find that a significant portion of your wealth has been wiped out.

That’s why it’s so important to have a long-term perspective when investing in Bitcoin. This will prevent you from worrying about short-term drops in value. It is difficult to think of a single financial asset that could outperform Bitcoin over the long term.

Yes, Bitcoin may no longer provide the stellar returns it offered early crypto investors. But from my perspective it still offers the ultimate mix of risk and reward.

Should you invest $1,000 in Bitcoin right now?

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.

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