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

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Investing in cryptocurrencies involves 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 by Chainalysis states that cross-chain bridge hacks accounted for $2 billion in losses this year, which represents 69% of total cryptos stolen. Since the start of 2022, there have been 13 cross-chain bridge hacks.

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

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

As these bridges are a central storage point for cryptocurrencies, they are targeted by hackers. Over the past decade, several cryptocurrency exchanges have been vulnerable to hacks. However, improved security measures have led to a decrease in such cyberattacks.

In addition to security concerns, the macro-economic environment remains extremely challenging, accelerating the ongoing sell-off. Rising interest rates have shifted capital to lower risk asset classes such as bonds. In addition, inflation and the prospect of a global recession have led to lower consumer spending over the past year.

But if you have a high appetite for risk, falling prices for these digital assets present investors with an opportunity to buy the dip. So where should you invest $1,000 right now?

Ethereum is a long term bet

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

Over the past month, ETH prices have jumped 40% due to an upcoming event known as “The Merge”. The Ethereum blockchain is moving from a proof-of-work (PoW) validation mechanism to a proof-of-stake (PoS) mechanism, which will significantly reduce transaction fees and greatly improve scalability.

The Ethereum network developers successfully merged the Goerli testnet, which was the last repeat of the testnet before the ETH 2.0 merger. The Ethereum Foundation plans to switch to the PoS mechanism by September 19, which will be a key driver of ETH prices in the short term.

Bitcoin continues to enjoy a first-mover advantage

Another long-term bet for cryptocurrency investors is Bitcoin (CRYPTO: BTC). Bitcoin was the first cryptocurrency launched in 2009 and remains the most popular digital asset in the world. Valued at US$451 billion by market capitalization, Bitcoin is held on the balance sheets of several publicly traded 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 view, Bitcoin could replace the yellow metal over time, offering huge upside potential for investors.

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

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