The crypto market is back to its volatile old ways again. The relentless downtrend of 2022 gave way to some strong gains in January, but the market's general trend is headed sideways these days. The leading crypto names are up one week and down the next.
That being said, I am convinced that digital currencies will disrupt many industries over the next few years, from banking and financial services to online games and insurance. Therefore, I see this dip as a great time to separate the wheat from the chaff and pick up high-quality cryptocurrencies on the cheap.
So let's push through the throng of lesser lights and wannabes to find some top cryptocurrencies on fire sale in February 2023. The crypto names below are down by at least 33% over the last year. Still, they have some seriously valuable real-world use cases, and with a bit of patience, they're sure to regain their worth in the long run.
CRYPTO: BTC
Key Data Points
Bitcoin: The massive granddaddy
Let's start with the digital elephant in the room. Bitcoin (BTC +0.94%) set the standard for what a cryptocurrency can be, and it remains the largest and most respected crypto name 14 years later.
Bitcoin's price is down 50% in the last 52 weeks but also up 38% from last year's rock bottom in November. Many experts agree that the long-term price target is far above today's modest price.
For example, noted growth investor Cathie Wood and her ARK Invest firm recently reminded investors that Bitcoin should be worth nearly $1.5 million per coin in the year 2030. The reason for that parabolic price gain is that Wood expects demand for Bitcoin to skyrocket while the lifetime supply is capped at 21 million Bitcoins. Nearly 92% of that limited supply has already been minted by Bitcoin miners, so there is not much room for inflation.
And if you look to MicroStrategy (MSTR +3.21%) chairman Michael Saylor, you'll get not a firm price target but a pretty solid analysis of what's next for the largest cryptocurrency. Over the next four to eight years, Saylor expects the regulatory framework around crypto to be straightened out, allowing large-scale institutional investors to get involved.
Based on this projection, Saylor's MicroStrategy is going all-in on Bitcoin. The data analytics company has converted essentially all of its cash reserves into Bitcoin, taking out loans and selling stock in order to grab more digital tokens. The company even took out a $205 million loan from Silvergate Capital (SI -25.00%), collateralized by some of MicroStrategy's existing Bitcoin holdings, for the sole purpose of purchasing another bunch of Bitcoins.
Whether you call it "skin in the game" or "bias," Saylor's company is voting with its wallet.
The company now holds approximately 132,500 Bitcoin tokens, worth roughly $2.88 billion at today's price. That's 55% of MicroStrategy's enterprise value and almost more than the company's current market cap. If Bitcoin goes bust in the future, so will MicroStrategy. But if it reaches Cathie Wood's 2030 target price, MicroStrategy's current tokens would be worth $196 billion (and I'm sure the company will buy more Bitcoin along the way).
So two smart people agree that Bitcoin has a bright future. They can still be wrong, and some other cryptocurrency might steal Bitcoin's thunder over the next few years, but it's not easy to disrupt a first mover with this much of a head start. The "digital gold" looks ready to live up to its nickname in the next few years, and this dip seems like a good time to pick up tokens at a low price.
CRYPTO: LTC
Key Data Points
Litecoin: A more practical take on Bitcoin
Where Bitcoin goes, Litecoin (LTC -0.10%) will follow. Litecoin started out in 2011 as a tweaked clone of Bitcoin. Some of the key differences are:
- Litecoin generates new data blocks more often than Bitcoin does.
- As a result, new transactions on the blockchain ledger are validated faster and with lower transaction fees.
- Its mining algorithm was explicitly chosen for its high processing rate using consumer-grade graphics cards instead of specially designed cryptomining chips.
Litecoin's quick and cheap transactions make it more useful for everyday retail use than Bitcoin. It's like whipping out a quick-and-easy debit card instead of Bitcoin's proverbial gold nuggets. As a result, the smaller Litecoin community has drummed up payment support from more than 5,000 e-commerce stores and services. That's fewer than Bitcoin's 12,000 merchants but far ahead of most other altcoins.
The coin crashed hard last year, partly due to a controversial privacy upgrade known as Mimblewimble. The code change led to regulators banning Litecoin in markets like Thailand and South Korea. However, most of the crypto world is still comfortable with allowing Litecoin trades, and the coin is widely available on popular exchanges such as Coinbase Global and Robinhood Markets.
The South Korean panic did not trigger a wave of Litecoin bans in other markets, and investors are starting to relax those tightly bunched nerves. All told, the Litecoin token is down 33% over the last year and should see stellar returns from this low point.
CRYPTO: DOT
Key Data Points
Polkadot: Knitting a Web3 fabric from other cryptos
I can't end this list in good conscience without including Polkadot (DOT -1.05%). It's the cryptocurrency at the heart of the Web3 sea change, destined to soar as the next-generation version of the internet takes over from the mishmash of ad-supported social networks you see in the current Web 2.0 model.
With smart contracts, bankless peer-to-peer value-exchange transactions, and transparent content-publishing systems, Web3 is ready to turn the online publishing and e-commerce worlds upside down. As the official blockchain network of the Web3 Foundation, giving developers easy ways to tie the strengths of many different cryptocurrencies and blockchains into a cohesive application, Polkadot will surely gain boatloads of value as the revolution plays out.
Yet the Polkadot token's price is down by 70% in 52 weeks. It is the 12th-largest cryptocurrency, with a market value of $7.06 billion, just ahead of Litecoin at $6.56 billion but far behind Bitcoin's dominant $419 billion footprint. Thanks to Polkadot's special and uniquely useful place in the Web3 ecosystem, I expect the token to start rubbing shoulders with Bitcoin and friends over the next couple of years. The opportunity for outsized growth is too obvious to ignore, and I take every chance I get to help you see it.
So if I could suggest only one cryptocurrency in today's market, my choice would depend on what you want your investment to achieve.
- Bitcoin is the safe-as-houses (in a digital sense) bet on long-term value storage.
- Litecoin is more of a digital dollar, to be used in everyday shopping transactions -- more liquid but perhaps more volatile in the long run.
- And Polkadot plays a completely different game, serving up a brand-new vision of what the internet can be.
For what it's worth, I've been holding on to my Litecoin and Bitcoin lately while buying several batches of additional Polkadot. I can't wait for Web3 systems to go mainstream in a big way, so I'm doing what I can to take advantage of that upcoming metamorphosis.
