How Bitcoin’s Bold Comeback in 2024 Could Transform Your Crypto Portfolio

The cryptocurrency market is growing in many ways. Right now, Bitcoin (CRYPTO:BTC) is rebuilding the industry dominance it lost during two major crashes a few years ago. Does this mean it’s time to double down on the biggest and oldest name in crypto, or should investors buy altcoins at a discount? Or does the right course of action lie somewhere in between?

Let’s take a look.

Bitcoin’s dominance in numbers

All my sources agree — Bitcoin is rebuilding its lost market dominance. The coin accounts for about 56% of the total crypto market cap today. That’s up from a bottom of about 39% in November 2022 and an even steeper drop of 32% in January 2018.

Now, Bitcoin has a long way to go before it regains the absolutely crushing market dominance it demonstrated in the early days. Until Ethereum (CRYPTO:ETH) rose to prominence in 2017, Bitcoin’s iron-fisted grip on the crypto market remained consistently above the 90% mark. And Ethereum’s second-highest never rose above 24%.

Long story short, Bitcoin has always set the tone for the broader crypto market. Its leading role has become even more evident recently after a seven-year decline.

So what’s the real big story?

Bitcoin’s rising dominance comes on the heels of two major events.

First, the Securities and Exchange Commission (SEC) has finally approved 11 applications to launch exchange-traded funds (ETFs) based on the spot price of Bitcoin. The launch of spot Bitcoin ETFs has provided institutional investors and other traditionalists with an easy way to access the Bitcoin market without opening a new account on a cryptocurrency trading platform. Seven months later, the leading iShares Bitcoin Trust ETF (NASDAQ:IBIT) has amassed a portfolio of $21.7 billion in direct Bitcoin holdings. The increased demand should boost the price of Bitcoin in the long run.

Secondly, Bitcoin has just completed its fourth instance of halving the rewards for cryptocurrency mining. As a result, the supply of new coins is now growing slower than the global supply of physical gold, arguably changing the game for long-term wealth holders. These halvings tend to cause radical increases in Bitcoin’s price every four years, starting a few months after each adjustment. Less than four months after the halving in April, this effect has not yet kicked in, but the economic model for crypto miners is under severe pressure.

What will happen next in the Bitcoin-altcoin balance?

From here on, changing dominance can inspire a number of mutually exclusive events, some of which are game-changing.

The story continues

Bitcoin could solidify its status as a “digital gold” and safe haven asset by attracting conservative investors and institutions during times of market uncertainty. In this scenario, each altcoin stands on its own and Bitcoin’s dominance could continue to grow.

Innovative altcoins with unique value propositions could gain market share as investors seek higher returns and diversification beyond their obvious Bitcoin bets. Big winners under these circumstances include Web3 token Polkadot (CRYPTO:DOT), Ripple’s (CRYPTO:XRP) global payments system, and high-speed smart contracts platform Solana (CRYPTO:SOL), to name just a few. Whether Bitcoin soars or not, each name on this list could carve out an ultra-specific market niche in a blockchain-based global economy.

Ethereum could build on its leadership in smart contracts over the next few years through technical upgrades, where so-called “Ethereum killers” like Solana and Avalanche (CRYPTO: AVAX) will eventually melt away, leaving the crypto market primarily split between Bitcoin and Ethereum.

Regulators fearful of a crypto market completely under Bitcoin’s control could impose new rules that are less favorable to Bitcoin’s expensive Proof-of-Work business model. Or they could choose to support the Bitcoin model, creating legal and economic barriers for competing systems. In either case, the law of unintended consequences suggests that new rules may not produce the expected results.

How to invest in crypto right now

So what can crypto investors do about this situation?

First, the wide range of possible outcomes suggests that the crypto space remains as volatile and unpredictable as ever. Veteran investors like Ark Invest’s Cathie Wood see bright futures for Bitcoin and Ethereum. More traditional investment minds like Warren Buffett want nothing to do with these newfangled digital ledgers, whose value is not tied to any physical asset. And the fluctuating graph of Bitcoin’s dominance could swing back down in a heartbeat — or not.

In short, no one really knows what will happen next, and there’s no guarantee that Bitcoin’s dominance trend will continue to rise. I understand why this volatile market might make you too rich to be on the sidelines with Warren Buffett. On the other hand, maybe Cathie Wood has the right idea, and tomorrow’s long-term wealth will be found in blockchain wallets.

There are no right or wrong answers here, just educated guesses and your own analysis. Ultimately, cryptocurrencies should play a supporting role in a diversified investment portfolio.

For example, in my case, direct crypto assets and Bitcoin ETFs make up less than 5% of my total investment portfolio. I have a stake in the crypto game, but not enough to do any real damage if the Bitcoin market tanked. Your experience may be different, but the vast majority of my crypto-related wallet is comprised of Bitcoin, with Ethereum and Polkadot battling for a distant second place.

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

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Anders Bylund has positions in Bitcoin, Ethereum, Polkadot, Solana, and XRP. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.

How Bitcoin’s Bold 2024 Return Could Transform Your Crypto Portfolio was originally published by The Motley Fool

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