Do you remember the heady days of 2021, when Bitcoin (BTC 3.55%) surged past $60,000, and the entire crypto market was hitting new heights? There were plenty of people saying that they wish they had bought Bitcoin when it was $20,000 or that they wish they had bought Ethereum (ETH 4.71%) below $2,000. After 2022's sell-off, patient, risk-tolerant long-term investors can do just that as prices have returned to these levels. Here are three cryptos that I would regret not buying during the dip.
Image source: Getty Images.
1. Bitcoin
CRYPTO: BTC
Key Data Points
Bitcoin has shown some signs of life as of late, rallying 33% off the 52-week low of $17,664 that it hit in June. Bitcoin is still a long way off from its all-time high of over $68,000 last November, and I like the fact that investors don't have to try to "catch a falling knife" now that the largest digital asset by market cap has stabilized and looks like it is building momentum again.
As the original cryptocurrency and the largest digital asset with a market cap of nearly $450 billion, Bitcoin is a blue chip cryptocurrency that I would buy during this pullback. When the stock market is down, it is a great time to start or add to discounted positions in top global companies, and the crypto market is no different -- during this downturn, investors can accumulate a position in Bitcoin at a discounted price rather than gambling on smaller altcoins with questionable utility that are down 95% from all-time highs they are unlikely to ever approach again.
Bitcoin's Lightning Network has made using and transacting in Bitcoin easier and more accessible than ever before. Companies like Block (SQ 1.06%) are leveraging Lightning to allow their customers to be paid in Bitcoin and to round up credit and debit card purchases for Cash Card users. These services are making Bitcoin more widely available to the general public than ever before and can help it reach even further adoption.
I like the idea of all investors holding at least a small amount of Bitcoin in their portfolios. The hard cap of 21 million Bitcoin that will ever exist stands in stark contrast to the inflationary nature of all other global currencies. Bitcoin is a worldwide network that anyone on the planet with an internet connection can participate in, so it remains an attractive asset to individuals in countries that have seen their currency suffer from serious inflation over the years, such as Turkey and Venezuela. The increasing ease of using Bitcoin and its global appeal as a decentralized asset with a capped supply make it an attractive investment to allocate at least some investment toward, especially during the current market weakness.
2. Ethereum
CRYPTO: ETH
Key Data Points
Ethereum has rallied over 100% from its cycle low in June, but the second-largest cryptocurrency is still down 60% from its all-time high. Ethereum is also benefiting from a major upcoming catalyst in The Merge, its long-awaited switch from the proof-of-work consensus to proof of stake. After completing a successful trial run on its Goerli testnet, The Merge is now expected to take place between Sept. 15th and Sept. 16th. The transition will make Ethereum less energy-intensive and thus more climate-friendly. It will also make Ethereum more decentralized, which proponents say will make it more secure. Furthermore, Ethereum will no longer be an inflationary asset and will instead become deflationary in nature, which will make it more scarce over time and should add to its value as demand increases. Some observers also point out that Ethereum will become more scalable as sharding is implemented. Lastly, more users will be able to earn staking rewards by participating in the Ethereum network. With this array of improvements in the wake of a major catalyst, Ethereum is another blue chip cryptocurrency that I have been adding to on the dip.
3. Solana
CRYPTO: SOL
Key Data Points
With a market cap of $15 billion, Solana (SOL 5.78%) is much smaller (and much newer) than Bitcoin and Ethereum but is also worthy of a position during the current downturn for investors who are looking to diversify and are comfortable moving a bit further down the risk curve. Solana is down 84% from its all-time high but is starting to catch some momentum as well, with a 56% increase since hitting its cycle low in June.
Solana is establishing itself as a smaller but viable competitor to Ethereum in the world of non-fungible tokens (NFTs), with leading Solana marketplace Magic Eden recently achieving unicorn status with a valuation of over $1 billion in a private funding round. OpenSea, which is viewed as the bellwether for the NFT market, recently opened up its platform to Solana NFTs after previously exclusively featuring Ethereum and Polygon (MATIC +0.00%) NFTs. Solana is now the second-largest protocol for NFTs as measured by secondary sales, trailing only Ethereum. Solana is home to a talented team of developers, and its uses are not limited to just NFTs or DeFi applications like many other cryptos -- Solana developers are even working on a phone that will make it easier to interact with decentralized applications when using a mobile device. This phone is scheduled to launch in early 2023 with a price point of $1,000. While this may seem a tad esoteric to some observers, I'm loath to count Solana out because co-founder Anatoly Yakovenko and other key figures from Solana all have prior experience at Qualcomm (QCOM 1.17%), which creates semiconductors for the mobile phone industry.
The crypto bear market has created the opportunity to start or add to positions in the top two assets that drive the entire industry, Bitcoin and Ethereum, as well as emerging challengers like Solana, at steep discounts to where they traded just a few months ago. For risk-tolerant investors, this could be the right time to allocate a percentage of their portfolios toward cryptocurrency with some smart buys.
