If you've got $500 to put into cryptocurrencies, it can be hard to know where to start. Before you even think about choosing individual cryptos, think about how these high-risk assets fit into your wider portfolio. The idea is to only include a small percentage of crypto and balance it out with a mix of less-risky assets, including stocks and bonds.
Once you've done that, look for cryptocurrencies that are already relatively established and have real-world utility. These are more likely to survive long term.
Here are three to consider.
1. Bitcoin
When I first started investing in cryptocurrencies, I got frustrated with lists like these that started with Bitcoin (CRYPTO: BTC). It's the biggest and best-known crypto out there, and back then I wanted to find under-the-radar projects that still had the potential to go to the moon. Since then, I've seen prices plummet, and some of those lesser-known projects have collapsed completely.
A look at historical prices shows that Bitcoin is one of the best choices for long-term investors. It is still volatile, but it's always erased its losses and gone on to reach new highs. If you only hold one cryptocurrency, make it Bitcoin or Ethereum (CRYPTO: ETH).
Bitcoin has potential as the backbone to the on-chain economy. It is already attracting increased institutional and corporate investment, and some governments have added it to their reserves. Another area where Bitcoin may stand out is as a form of digital gold -- a safe asset that may offer a hedge against inflation. It has yet to prove itself in this regard, but it may do so as it continues to mature.
2. Ethereum
Ethereum is the second-biggest crypto by market capitalization. It was the first crypto to introduce smart contracts, which are what make cryptocurrencies programmable. Smart contracts allow developers to use Ethereum's ecosystem to build other cryptocurrencies, stablecoins, non-fungible tokens (NFTs), and a host of decentralized applications.
Critics point to Ethereum's high fees and relatively slow transaction times. That hasn't stopped Ethereum from retaining its dominant position in decentralized finance. According to DefiLlama, almost 60% -- more than $70 billion -- of the funds in on-chain applications are on the Ethereum network. Some are turning to faster, lower-cost cryptocurrencies like Solana (CRYPTO: SOL), but when it comes to handling people's money, reliability goes a long way.