As a beginner you might find it hard to know exactly how to invest 1000 dollars in cryptocurrency, often leading to procrastination.
At the same time, you know that your cash is losing value due to inflation, so you must do something.
I’m going to tell you exactly where I would place my money as a beginner to make the best returns, without taking on too much risk.
After reading this article, you’ll no longer worry about picking the best cryptocurrencies, and know what I would do in your position.
The best way to invest 1000 dollars in cryptocurrency is to put $500 in Bitcoin, $300 in Ethereum, and $200 in Chainlink. The expected ROI of this portfolio is 2.866 in 2021, making the investment grow to $2866. With this portfolio, you might make great returns, while taking on relatively little risk.
Let’s go through why this is the best way to invest $1000 in cryptocurrency.
How I Would Invest $1000 in Cryptocurrency
If you’re a beginner wondering how to invest $1000 in cryptocurrency, the perfect beginner portfolio consists of Bitcoin, Ethereum and Chainlink.
Let’s go through my arguments for each one, as well as the diversification I would go with:
Bitcoin – The Index Fund of Cryptocurrencies
If you’re unfamiliar with how the cryptocurrency market works, know this: Bitcoin is the market mover.
Whenever Bitcoin moves, the rest of the market follow. If Bitcoin surges up in price, most altcoins do as well, and if Bitcoin crashes – so does most altcoins.
One way to think about it, is that Bitcoin acts as an index fund for the cryptocurrency market.
It gives you a general exposure to the price-movements of crypto, with the least amount risk required.
Index funds are praised as the best investment option for “normal people” by people like Warren buffet. The reason for this is that index funds gives you broad exposure and great diversification, which is key for beginners.
Bitcoin does the same thing – it gives you broad exposure, and diversification, even though you technically put all your eggs in one basket. This is, again, because Bitcoin is the market mover.
The last thing you want to do is to out all you hard-earned money into one single altcoin like XRP or ADA.
Even though they have great potential returns to offer, it is way too risky to go all in on a project that might fail even if cryptocurrency succeeds as an asset class.
If cryptocurrency goes mainstream, which it will, you can bet that Bitcoin will go mainstream as well. This is not the case for any altcoins – not even Ethereum.
For this reason, I would put 50% of the $200 dollars into Bitcoin – to gain a broad exposure and take on as little risk as possible.
Ethereum – The Internet of Cryptocurrencies
My second pick for the best way to invest $1000 in cryptocurrency is Ethereum.
“Why not just go all in on Bitcoin?“
Because Ethereum offers a much higher potential return than Bitcoin.
“Okay, but why Ethereum?“
Once again, the reason is that you gain broad exposure – this time, to the largest ecosystem of blockchain applications:
Ethereum is what we call a “programmable blockchain”, which means “a platform to build stuff on”.
You can think of Ethereum as “the internet of the cryptocurrency industry”.
Developers can make applications on Ethereum, which use ETH (the Ethereum coin) to function; we call them dApps (decentralized apps). These applications gain the benefits of blockchain technology.
If many people use these applications, the value of Ethereum increases.
Right now, Ethereum is way ahead of it’s competition, which is one of the reasons I think Ethereum is a good investment.
The image below shows how much bigger Ethereum is than its competition:
With Bitcoin, you get the “index fund” effect, the broad exposure to the general cryptocurrency market. With Ethereum, you get the added exposure to the ecosystem of dApps; applications that run on the Ethereum Blockchain.
Therefore, I would pick Ethereum as my number two when investing $1000 in cryptocurrency, giving it a 30% stake – $300.
Chainlink – The Oracle of Cryptocurrency.
Chainlink is one of the most promising altcoin projects out there. They solve something called the oracle problem:
This is a bit technical, but what Chainlink does, is to enable blockchains to communicate with the real world.
The Ethereum blockchain has no concept of what “one U.S. Dollar” means, and cannot verify that a user of the blockchain hold any USD in a wallet.
Chainlink makes it possible for a blockchain to understand what “one U.S. Dollar” is, and to check if you actually got some of it.
The way it works is that Chainlink uses “oracles” to verify data from the real world, like your bank account, and feeds this info to the blockchain and smart contracts.
This is a visual representation of what Chainlink does:
It connects the real world with the blockchain world. It’s the link between real world data, and blockchain applications.
Another reason I would go with Chainlink is the amount of partnership they have.
At the time of writing, they have over 450 partnerships, including a partnership with Google.
This ingrains them deep into the crypto industry, making them a good choice when investing $1000 in cryptocurrency.
As far as diversification goes, I would put 20% ($200), into Chainlink.
What Returns Can You Get by Investing $1000 in Cryptocurrency?
Given our portfolio of 50% Bitcoin, 30% Ethereum and 20% Chainlink, we can expect some good returns.
In addition, we have not taken on more risk than necessary, as all three give us broad exposure, and are all deeply integrated into the cryptocurrency industry.
The expected returns depend on the time frame you’re working with. Generally, the longer you hold the better.
As they say:
Time in the market beats than timing the market.
Expected ROI From Investing $1000 in Cryptocurrency in 2021:
I have price predictions for 2021 for all these coins:
I think Bitcoin will reach (at least) $100K. I think that Ethereum will reach $8000, and that Chainlink will reach $125.
If I were to invest $1000 right now, at the current prices, my expected returns would be the following:
Bitcoin: $100K (predicted price) / $60K (current price) * $500 (invested amount) = $833
Ethereum: $8000 (predicted price) / $2000 (current price) * $300 (invested amount) = $1200
Chainlink: $125 (predicted price) / $30 (current price) * $200 (invested amount) = $833
Total value of portfolio at the end of 2021: $833 + $1200 + $833 = $2866
ROI = $572 / $200 = 2.86 = 186%
In other words, for each dollar I Invest, I get 2.86 dollars at the end of 2021, given that my predictions hold true.
If you have some more money saved up, and manage to invest $3000, you’d have $8600 at the end of 2021.
You can calculate it for yourself, using the formula this formula:
Predicted price / current price * invested amount = Value at end of 2021.
The only thing you have to change from the calculations above is the “current price”. You can check that by clicking the links below:
Check Bitcoin Price, Check Ethereum Price, Check Chainlink Price.
Conclusion – How to Invest $1000 in Cryptocurrency
Well, now you know how to invest $1000 in cryptocurrency. You take 50% of it into Bitcoin, 30% in Ethereum, and 20% in Chainlink.
This way of investing $1000 in crypto would give you an expected ROI of 2.86, growing your $1000 into $2866 by the end of 2021, given my price predictions and the current prices.
These are actually the same three coins I picked for my top three best crypto investments for the next five years. In that article, I go in-depth on the reasons why. However, it’s a bit more technical.
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Do you agree with my three picks?