Cryptocurrency Investors: Where to Invest $1,000 Right Now?

Cryptocurrency investors could benefit from inflation protection and price appreciation by placing bets on leading digital assets like Bitcoin and Ethereum.

A depiction of the cryptocurrency Bitcoin

Image source: Getty Images.

Investing in cryptocurrencies carries certain risks. In addition to the volatility associated with these digital assets, the lack of regulation and multiple successful hacking incidents have kept investors at bay.

For example, a report from Chainalysis states that cross-chain bridge hacks have amounted to US$2 billion in losses this year, accounting for 69% of total crypto stolen. Since the beginning of 2022, there have been 13 cross-chain bridge hacks.

So, what are cross-chain bridges? Basically, these blockchain bridges enable the transfer of cryptocurrencies between two blockchain networks. Blockchain networks are similar to silos and don’t communicate with each other.

With the advent of cross-chain bridges, users can deposit their Ethereum (CRYPTO:ETH) (or any other token) to a cross-chain bridge. The ETH token is then locked under a contract, and users are issued the equivalent of another token, such as Polygon to use the Polygon Bridge.

As these bridges are a central point of storage for cryptocurrencies, they are targeted by hackers. In the past decade, several cryptocurrency exchanges have been vulnerable to hacks. However, an improvement in security measures has resulted in a decline in such cyber-attacks.

In addition to security issues, the macro-economic environment remains extremely challenging, accelerating the ongoing sell-off. The rise in interest rates has shifted capital towards low-risk asset classes such as bonds. Further, inflation and the prospect of a global recession have driven consumer spending lower in the last year.

But if you have a large risk appetite, the decline in the prices of these digital assets provides investors an opportunity to buy the dip. So, where should you invest $1,000 right now?

Ethereum is a top long-term bet

Ethereum is the second-largest cryptocurrency in the world, valued at a market cap of US$228 billion. While ETH is down over 60% from all-time highs, it has returned 460% to investors in the last five years.

In the last month, ETH prices have surged 40% due to an upcoming event known as “The Merge.” The Ethereum blockchain is transitioning from a proof-of-work (PoW) validating mechanism to a proof-of-stake (PoS) mechanism, which will reduce transaction fees considerably and improve scalability significantly.

Developers of the Ethereum network successfully merged the Goerli testnet, which was the final testnet rehearsal before the ETH 2.0 merge takes place. The Ethereum Foundation expects to move towards the PoS mechanism by September 19, which will be a key driver of ETH prices in the near term.

Bitcoin continues to enjoy a first-mover advantage

Another top long-term bet for cryptocurrency investors is Bitcoin (CRYPTO:BTC). Bitcoin was the first cryptocurrency launched back in 2009 and remains the most popular digital asset in the world. Valued at US$451 billion by market cap, Bitcoin is held on the balance sheet of several publicly listed companies.

Bitcoin is also known as digital gold as a global network of computers “mine” BTC tokens to confirm transactions. Global gold reserves currently stand at $9.2 trillion and, in my opinion, Bitcoin could replace the yellow metal over time, providing massive upside potential for investors.

If you think Bitcoin might serve as a good store of value and hedge against inflation like gold, the digital gold could account for a larger portion of your cryptocurrency portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has positions in Bitcoin, Ethereum, and Polygon. The Motley Fool recommends Bitcoin, Ethereum, and Polygon.

More on Investing

dividends grow over time
Dividend Stocks

1 Magnificent Dividend Stock That’s Down 10% and Trading at a Once-in-a-Decade Valuation

This dividend stock may be down around 10%, but there is a huge future opportunity for those wanting growth as…

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

RRSP Must-Haves: 2 Canadian Stocks to Secure Your Future

The TSX’s dividend pioneer and first Dividend King are must-haves in an RRSP to ensure financial security in retirement.

Read more »

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Clean Energy Play: Is Brookfield Renewable a Good Stock for a TFSA?

Add this top renewable energy stock to your self-directed TFSA portfolio for significant long-term and tax-free wealth growth.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

financial freedom sign

2 Stocks With Millionaire-Maker Potential

These two top Canadian stocks are among the best on the TSX, and each has the potential to be millionaire-maker…

Read more »