Got $500? 2 Cryptocurrencies to Buy and Hold for Decades

Key Points

• Spot crypto ETFs are one way for investors to get exposure to cryptocurrency at much lower prices.

• For just $500, it's possible to put together a blended portfolio of Bitcoin and Ethereum using only ETFs.

• Together, Bitcoin and Ethereum account for nearly 75% of the value of the crypto market and should be the two linchpins of any portfolio.

• 10 stocks we like better than iShares Bitcoin Trust ›

It's understandable why many first-time crypto investors experience sticker shock when they start thinking of investing in the crypto market. Bitcoin (CRYPTO: BTC) is now trading for almost $120,000. And Ethereum (CRYPTO: ETH), the world's second-largest cryptocurrency, is now trading for more than $4,000.

However, there's an easy, no-brainer way to gain exposure to both of these top cryptocurrencies for $500 and still have some money left over. Here's how to do it.

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Spot crypto ETFs

If you choose to invest directly in the crypto market, $500 will only get you about .004 BTC or .1 ETH. There's nothing wrong, of course, with holding fractional amounts of these cryptocurrencies. But there's admittedly something very satisfying about owning full amounts of anything. And that includes crypto.

Thus, one option might be to explore the new spot crypto exchange-traded funds (ETFs). There are now plenty of choices for both Bitcoin and Ethereum, but most investors tend to gravitate to the spot crypto ETFs from BlackRock (NYSE: BLK). For Bitcoin, that's the iShares Bitcoin Trust ETF (NASDAQ: IBIT), and for Ethereum, it's the iShares Ethereum Trust ETF (NASDAQ: ETHA).

Both of these ETFs are designed to track the price performance of the underlying cryptocurrency. If Bitcoin goes up by 10%, the price of the ETF should go up 10% as well. Thus, owning these spot crypto ETFs is tantamount to owning the underlying cryptocurrency. Instead of buying them in the crypto market, you can gain access to them as easily as any other publicly traded ETF or stock.

That makes them perfect for gaining access to Bitcoin and Ethereum at dramatically reduced prices. For example, the iShares Bitcoin Trust ETF is now trading for about $67, while the iShares Ethereum Trust ETF is now trading for $33. Of course, you don't have to choose the BlackRock ETFs. You could just as easily pair up Bitcoin and Ethereum ETFs from other asset managers.

Putting $500 to work in crypto

If you have $500, you can very easily create a blended Bitcoin-Ethereum portfolio. The easiest way to do this is by comparing the market caps of the top cryptocurrencies to the total value of the crypto market (which is currently about $4 trillion) and using that to come up with the optimal weighting for each.

Image source: Getty Images.

Bitcoin, with a market cap of about $2.4 trillion, accounts for almost 60% of the total market cap of crypto. Ethereum, with a market cap of $530 billion, accounts for roughly 13% of the market cap of crypto. Smaller cryptocurrencies make up the rest. For example, XRP (CRYPTO: XRP) chips in another 5%, while Solana (CRYPTO: SOL) adds another 2.5%.

Thus, if you were looking for a diversified crypto portfolio, you would likely start with a mix of 60% Bitcoin, 13% Ethereum, 5% XRP, and 2.5% Solana. From there, you can either ratchet up or down your Bitcoin and Ethereum allocations, or add in several other cryptocurrencies. Since most investors are only focused on the top cryptocurrencies, one option would be a 70% Bitcoin, 30% Ethereum blend.

It's relatively easy to achieve the desired blend with the ETFs. Of the $500, use $350 to buy about five shares of the iShares Bitcoin Trust and $140 to buy four shares of the iShares Ethereum Trust. Plus, there's $10 left over. You could easily put that to work by scooping up three XRP tokens (at a cost of roughly $10), or putting that money into dollar-pegged stablecoins while you wait for new investment opportunities.

This might sound relatively simplistic, and to a certain degree, it is. But it's also the same strategy that diversified crypto ETFs are using today. For example, Trump Media & Technology Group (NASDAQ: DJT) plans to launch a new crypto ETF -- the Truth Social Crypto Blue Chip ETF -- that includes a mix of different cryptocurrencies. The desired mix is 70% Bitcoin, 15% Ethereum, 8% Solana, and 2% XRP.

Buy and hold for decades

The best part about a crypto ETF strategy is that you can buy and hold Bitcoin and Ethereum for decades. In contrast, if you start moving money into riskier, more speculative cryptocurrencies, you likely won't be holding them for long.

For first-time crypto investors, I can't think of a better approach than to focus on just Bitcoin and Ethereum, and use low-cost ETFs to get exposure to them. Depending on your overall risk tolerance, your desired blend might change, but it's safe to say that Bitcoin should account for the lion's share of your total crypto exposure.

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Dominic Basulto has positions in Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.