With more than 20,000 different cryptocurrency coins and tokens in the market, investor interest is growing rapidly. But picking the right mix to maximize your long-term returns can be tough under the best circumstances — trying to do so in a cryptocurrency bear market, a k a “crypto winter,” can be overwhelming.
If you’re wondering about the best long-term cryptocurrencies to buy this year, keep reading to find out.
5 Best Long-Term Cryptocurrencies
Here are the top five cryptocurrencies with potential as long-term investments.
- Bitcoin (BTC)
- Ethereum (ETH)
- Cardano (ADA)
- Polkadot (DOT)
- Chainlink (LINK)
1. Bitcoin (BTC)
Bitcoin is the largest cryptocurrency in the world by market cap. You can use it to make purchases online and off, or, if you’re like most bitcoin investors, view it as one of your buy-and-hold assets in your investment portfolio. It has become more of a safe-haven investment than a currency, earning it a place within your long-term cryptocurrency portfolio.
Bitcoin got a boost last year when Tesla CEO Elon Musk announced the company had purchased $1.5 billion worth, and later, that it would accept bitcoin as payment for its cars.
Although Musk rescinded shortly after, citing environmental concerns, and ultimate sold off most of Tesla’s bitcoin holdings, plenty of other companies, including Microsoft, PayPal, The Home Depot and Rakuten, accept bitcoin as payment, albeit indirectly in some cases.
Other businesses are adding bitcoin to their investment holdings. And in April, Goldman Sachs made its first cash loan secured by bitcoin.
Bitcoin is a volatile asset as you track it day to day, as evidenced by its recent price dip to under $18,000 from a one-year high of over $68,000. However, it has been the best-performing investment asset for the last 10 years, and a recent network upgrade to add functionality will make the platform more useful and could make the coin more valuable.
2. Ethereum (ETH)
ETH ranks as the second-largest cryptocurrency by market cap. Ethereum is the name of both a blockchain platform and the platform’s native cryptocurrency. The token can be used as a store of value, which is bitcoin’s strength, but Ethereum also has emerged as one of the best platforms for decentralized apps, also referred to as dApps.
In fact, it has become a favorite platform for developers because of its support for applications such as smart contracts, which automatically execute a function when specific conditions are met.
Ethereum is in the process of an upgrade. Initially called Eth2 and now referred to internally as The Merge, the result will be improved scalability, security and sustainability of the network, according to the Ethereum website.
While some analysts doubt The Merge will have a bullish effect on ETH, others believe ETH could more than double in value this year. Much depends on the success of The Merge, which is scheduled for September. As of mid-July, ETH bulls are buying up coins in anticipation, driving the price up more than 50% over the course of one week, according to Finbold.
Goldman Sachs has taken notice of investor interest in ETH. It plans to offer ethereum options trading, just as it allows for bitcoin.
3. Cardano (ADA)
Cardano is another cryptocurrency to invest in for the long term. While the coin’s bear-market performance has been a shambles — founder Charles Hoskinson tweeted, “Cardano could cure cancer … and we’d still fall” — the platform has one major benefit over Ethereum: a proof-of-stake protocol.
Whereas Ethereum currently uses an older proof-of-work protocol for verifying transactions and protecting the integrity of the network, Cardano’s proof-of-stake protocol serves a similar function, but it’s faster, cheaper and more energy-efficient.
Although Ethereum’s upgrade might level the playing field — and flood the market with proof-of-stake assets — Cardano’s popularity among decentralized application developers could keep demand high for its ADA token.
In the 24 hours following Cardano’s recent “hard fork,” or change to its protocol, over 100 smart contracts were deployed on the network, according to CoinMarketCap, and it has experienced exponential growth since then.
4. Polkadot (DOT)
With a market cap of over $7.52 billion, polkadot has become one of the best long-term cryptocurrencies to buy since its launch in 2020. It’s not only a cryptocurrency but also a blockchain network where developers can build innovative, decentralized systems.
Polkadot is built to connect various independent blockchains into a single unified network, and even create new chains. The integration allows users to access the network’s proof-of-stake validation of security and transactions and makes it easier to transfer digital assets like apps and tokens across blockchains.
A recent update facilitates communication and asset transfers between Polkadot parachains, opening the network up to new use cases.
Although Polkadot must compete with Ethereum and Cardano, its early entry into smart contracts gives it an edge some analysts expect it to maintain.
5. Chainlink (LINK)
Chainlink ranks as the fifth-best cryptocurrency to invest in for the long term. Launched in 2014, the Ethereum-based network provides real-time data from off-blockchain to on-blockchain smart contracts via nodes and oracles. Its mission, according to Securities.io, is to create the world’s first blockchain oracle network.
Oracles are behind some of the most important blockchain technology and are integral to blockchain’s expansion.
The Chainlink 2.0 upgrade, described in a 2021 whitepaper, will build off-chain networks on top of oracles to reduce computational strain on the Ethereum mainnet, Benzinga reported. The upgrade will also implement staking, which will increase security by providing nodes with “strong economic incentives to behave reliably and correctly,” the whitepaper noted.
Chainlink’s token, called LINK, facilitates transactions on the network. It currently has a market cap of $3.32 billion, placing it within the 25 largest cryptocurrencies.
Benefits of Investing In Cryptocurrency for the Long Term
A cryptocurrency is a form of digital money without a central management system, such as a government. You can buy goods or services using cryptocurrency, but many people treat it as a long-term investment option.
Expectations of Long-Term Investments in Cryptocurrency
A profitable long-term investment in cryptocurrency is one with value that appreciates over a period of time and suits your investing goals.
Typically, long-term investors hold their investments for several years or decades to grow their returns. So, if you believe blockchain-based technology will explode in the future, investing in crypto for the long term can be a great option.
However, it’s crucial to keep in mind that investing in cryptocurrencies exposes your investment to volatility and numerous risks, such as wallet hacking. Therefore, you must understand what you are putting your hard-earned money into before venturing into the cryptocurrency space.
5 Benefits of Long-Term Cryptocurrency Investments
- Buying and holding cryptocurrencies may create a path toward financial independence while helping you beat inflation over time.
- Younger investors who have faith in cryptocurrency technology think it will get wider adoption in the future, thereby increasing its value.
- As a store of value in the long term, the more real-world applications it has, the more likely it is that its value will increase.
- The long-term cryptocurrency investment gives you direct control over your portfolio. That means lower fees and better access to your investment.
- Cryptocurrencies give you a tool to build personal wealth over the long term if you invest in a small but diversified group of coins.
How To Choose the Best Long-Term Cryptocurrencies for Your Investment Portfolio
Before you venture into creating a long-term cryptocurrency investment portfolio, there are four critical questions you need to consider.
1. What Is Your Risk Tolerance?
To buy into or invest in cryptocurrencies for the long term, you need to have a high risk tolerance. Cryptocurrency values rise and fall drastically. Furthermore, there are no guarantees they will not end up collapsing.
Take time to consider what would happen to you if all your cryptocurrency suddenly became worthless. Again, putting your money in cryptocurrency is speculating and not investing, per se. You can only hope that sometime in the future, you’ll be able to sell your coins for more than you paid for them.
2. Why Are You Buying Crypto?
Let’s say you are years away from your retirement date and you decide that you need to allocate at least 20% of your investment portfolio to aggressive investments. If that is you, then long-term cryptocurrencies could be one avenue into high returns.
There is a long-term value attached to cryptocurrencies due to blockchain technology. This has infinite potential to drive innovations within the financial and other industries. Therefore, investing in crypto for the long term is like investing in the jewel in the crown that is blockchain.
3. How and Where Do You Intend To Purchase Crypto?
You may see this as trivial, but you cannot just walk into a bank or other financial institution and buy cryptocurrency. Peer-to-peer platforms and cryptocurrency exchanges operate under little or no regulation. That means as an investor, you lack the oversight and protection offered by mainstream investment platforms and banks.
You have the added burden of assessing and evaluating differing layers of security within your preferred platform. Part of your due diligence is finding and securing the right wallet. Your wallet may be cloud-based or a physical device you can safely keep at home. There is the additional danger that if you lose your keys, you also lose your investment.
4. Which Crypto Goes Into Your Long-Term Investment Portfolio?
Thousands of token options are available in the crypto market.
Bitcoin has the advantage of being the firstborn, having the largest market share and currently being the most popular. These traits allow bitcoin to maintain and increase value over time, making it among the safer long-term cryptocurrency investment assets.
Conversely, you may find that less well-known currencies are driving innovation. Such innovations often have white papers you can review to learn more. Consider whether the potential for growth outweighs the greater risk.
In the cryptocurrency world, almost anything can trigger excessively high returns from a crypto — take dogecoin, for example, which saw a massive rise in value despite having begun as a joke. Of course, what goes up can also come down, and dogecoin prices did — dramatically.
4 Tips for Investing In Crypto
Before putting your hard-earned money into cryptocurrency, you may want to consider these tips.
1. Invest With a Strategy
You’ve probably heard of the phrase “failing to plan is planning to fail.” This holds true when it comes to investing. Having a strategy that works well with your investing goals is the first step toward cutting down losses.
2. Have a Risk Management Strategy
Set a limit on how much you invest in a token and stick to it. Using stop losses to minimize your losses is also a great way to manage your risk. Additionally, don’t invest in crypto with money you cannot afford to lose.
3. Diversify Your Portfolio
Investing in just a single crypto in this highly volatile market is not a good idea. Diversifying your portfolio by investing in different tokens will reduce overexposure if one coin — or more — plummets in value.
4. The Secret Is Long Term
Prices tend to fall and rise dramatically on a regular basis. Avoid panic selling after a fall in prices within a short period. Instead, hold your investments in the market for long periods to attain the best return on investment.
Good To Know
Cryptocurrencies are highly volatile assets. While investing in digital assets can be one way to amass wealth quickly, your investment portfolio can plummet in as little as one day.
Is It Worth Investing In Cryptocurrencies for the Long Term?
The right answer to this question depends on your investing goals. If you have some spare money that you won’t mind investing for one to two decades, investing in crypto could be a great option.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of July 21, 2022.