It’s fair to say that even people who don’t invest in crypto have at least heard about Bitcoin (CRYPTO:BTC). They just might not be able to name any other digital currency.
It makes sense. Bitcoin’s hefty market cap of roughly $900 billion makes it larger than the next 40 cryptocurrencies combined. It’s an obvious path for an investor wanting some exposure to the world of digital currencies, but is it the best approach? Could a portfolio where that investment is divided evenly between Ethereum (CRYPTO:ETH) and Shiba Inu (CRYPTO:SHIB) deliver greater returns? Let’s check out the two portfolios to see which strategy makes the most sense for you.
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Standing atop the crypto market for more than a decade
Keith Noonan (Bitcoin): While other high-flying cryptocurrencies have come and gone after posting exciting, flash-in-the-pan pricing growth, Bitcoin has remained the focal point of the overall cryptocurrency market since its inception. The market-leading cryptocurrency has a legion of devoted backers for whom the token has almost religious significance, and the digital currency’s highly engaged community of supporters has helped it march to incredible gains and remain atop the market.
Even after substantial sell-offs, Bitcoin has a market capitalization of roughly $896 billion. Its market cap accounts for roughly 41.5% of the total cryptocurrency market and is roughly double the size of Ethereum’s valuation.
Bitcoin was created in 2009 and has been the largest cryptocurrency ever since. Meanwhile, Ethereum debuted in 2015, and Shiba Inu’s digital token was minted in 2020. The gulf between the respective points of origination may not seem like much, but five years is a veritable lifetime twice over in the fast-moving crypto space, and Bitcoin’s longevity is incredibly impressive when viewed in context.
Shiba Inu may still have explosive potential, but it continues to look like an incredibly high-risk investment even by cryptocurrency standards. And while the Ethereum’s application-building functionality positions the ether token to grow with the evolution of cryptocurrencies, non-fungible tokens (NFTs), and other applications on the network, there’s also a significant downside to this dynamic. If the overall value or adoption of Ethereum-based altcoins or NFTs drops precipitously, there’s a good chance that the ether token will see significant sell-offs as well.
Bitcoin is the top brand name in the cryptocurrency space and has managed to survive through crashes and periods of market turmoil and uncertainty. While the thesis that Bitcoin will function as an effective store of value over the next decade and beyond is still to be tested, the token still stands out as a top play for investors seeking long-term exposure to the crypto space.
We’re not aiming for the truck
Rick Munarriz (Ethereum and Shiba Inu): Bitcoin is great, and over time it has easily beaten the market. What if you could crush the market instead? Investing the same amount — only allocating half to Ethereum and the other half to Shiba Inu — will be riskier than just going all in on Bitcoin. The potential return makes it the better approach for risk-tolerant investors.
Past performance is no indicator of future performance, but have you charted these three cryptos? Bitcoin is up a respectable 153% over the past year. Ethereum has soared 583% in the same time. Shiba Inu is up — checks notes — more than 57,000,000% over the past year.
It’s at this point where the orchestra takes it down a notch. I’m going to disappoint the Shiba Inu bulls by saying that I don’t think the trendy meme coin is going to be a crypto leader in the year ahead. My argument here is that Ethereum has what it takes to more than double Bitcoin’s gains in 2022, singlehandedly winning this battle even if Shiba Inu goes to zero.
Shiba Inu is not going to zero. I just don’t want to get into the game of predicting how many zeroes will follow the decimal point in forecasting where Shiba Inu will be in a year. Ethereum’s path to appreciate is far more clear. A year from now it should have completed the highly anticipated upgrade that will make it faster, allowing it to process more transactions. It will also be cheaper to use as well as more eco-friendly to produce. Ethereum already has several advantages to Bitcoin in terms of functional use in smart contracts, NFT marketplaces, gaming, and other online platforms. Within a year it wouldn’t be a surprise to see Ethereum closing the gap with Bitcoin, and that should be enough to warrant choosing a portfolio that is 50% Ethereum and 50% Shiba Inu over one that is 100% in Bitcoin.
Flipping a coin
The obvious answer to some will be to stick to the top cryptocurrency, limiting the divesting into digital currencies to Bitcoin. Others will favor trying some of the faster moving denominations including Ethereum and Shiba Inu. Both approaches could beat the market in 2022.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. 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.
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