Have $5,000? Which Should You Invest in: Bitcoin or Cardano?

Whether you’re just starting your journey in crypto investing or not, you’ve undoubtedly encountered discussions around Bitcoin (BTC 0.06%) and Cardano (ADA 0.41%), albeit for different reasons.

Let’s analyze these two cryptocurrencies to determine which might be the better option for a $5,000 investment.

Reasons to consider buying Bitcoin

There are several compelling arguments for including Bitcoin in nearly every investor’s portfolio, particularly due to its foundational role in the cryptocurrency market. With a market capitalization of $1.9 trillion, millions of holders, and no central authority aside from its complex protocol, Bitcoin’s status is formidable.

The principal factor expected to drive Bitcoin prices higher in the future is the increasing difficulty of mining new coins. Moreover, there is a hard cap of 21 million Bitcoins that can ever be mined, which protects its purchasing power from being diluted by new coins over time. Consequently, as individuals, governments, companies, banks, and other institutions acquire Bitcoin as a hedge against inflation, the price could rise as competition for the limited supply intensifies.

The strategy appears to be faring well for long-term holders. Over the past five years, Bitcoin has appreciated by 897%. Furthermore, the blockchain recently underwent upgrades that allow for the minting of non-fungible tokens (NFTs) and potentially tracking real-world assets, which may lead to additional demand if these applications gain traction.

However, few would argue that Bitcoin is technically innovative these days. Even fewer would contend that it’s either inexpensive or fast, given its significant transaction fees and the lengthy times required for many transactions to finalize. While these drawbacks may not pose a substantial threat to its value due to its established position, they do indicate that its core technology has less impact on its investment narrative.

Why Cardano might appeal to some investors

In stark contrast, Cardano presents itself as a newer, more dynamic blockchain.

With much lower fees, quicker transaction times, a smart contract programming environment, and a burgeoning ecosystem of decentralized finance applications—including several meme coins—its market cap stands at only $26.1 billion, representing a tiny fraction of Bitcoin’s scale.

This size disparity may suggest to some investors that smaller assets have a greater potential for exponential growth than larger ones. Cardano’s performance over the past five years supports this notion, with its price increasing by more than 1,300%. The critical questions remain whether Cardano can consistently outpace Bitcoin’s growth and whether it is a safe investment for those buying in now.

From a safety perspective, Bitcoin likely offers a more secure option. Cardano does not have a capped supply, allowing chain operators the flexibility to create more tokens to support ongoing development, which can dilute existing investors’ holdings. Currently, 31% of its potential supply is reserved for future issuance. While sustained high demand could mitigate issues for investors, the risk remains that larger competitors like Solana or Ethereum could siphon off capital from Cardano’s ecosystem.

There are already signs that this may be occurring, as emerging sectors within cryptocurrency—such as artificial intelligence (AI) infrastructure and meme coins—are not gaining traction on Cardano at the same pace as they are on other platforms. This landscape renders investing in Cardano somewhat risky, particularly for those with a higher risk tolerance.

Thus, if you’re considering a $5,000 investment, Bitcoin may be the smarter choice for the average investor. Those prepared to adopt a long-term buy-and-hold strategy are less likely to experience financial loss. On the other hand, Cardano could be suitable for those pursuing aggressive growth opportunities—just keep in mind that it may not be the top player in its category and that the inherent risks to its growth trajectory appear to be increasing.