The cryptocurrency market showed some signs of recovery in early 2023, but now it's back in dire straits again. Just when you thought the FTX meltdown might be over, another crisis rocks the crypto world. Silvergate Capital delayed filing its annual report and warned that it might be in financial trouble. This could start another protracted downturn, or you could see it as another chapter of the FTX saga.

So the crypto rally that started in January is taking a break again. Bitcoin (BTC -0.17%) prices are down 10% in two weeks and Ethereum (ETH 1.50%) has lost 8% over the same period. Moreover, ultra-volatile meme coins are taking even bigger cuts. Dogecoin is down by 14% and Shiba Inu has taken a 17% haircut over the same two-week span.

In this unpredictable market, many investors wonder whether cryptocurrencies will ever return to solid long-term growth.

I'm convinced they will, but the rising waters will not lift every boat. This crypto winter is also a house cleaning that should set the long-term winners apart.

Reshaping financial systems

The basic premise of crypto investing is simple: Digital currencies are poised to reshape and disrupt how money is made, stored, and transferred. Lots of financial functions that require banks and other intermediaries today will move to decentralized systems in the relatively near future.

Many things will change when automated blockchain networks and smart contracts replace human agents and go-betweens who want a cut of every transaction. Transactions will be faster and cheaper. Risk assessments will rely on artificial intelligence and machine learning. From banking and insurance to online gaming and gambling, a plethora of trillion-dollar industries stand on the threshold of a new era.

Every step forward is a battle

The promise of immense improvements also points to radical changes, and change can be scary. It's no surprise to see the old guard of financial institutions digging in their heels to preserve the world they know and the business they run today. So the sea change will take years and every step forward is a battle. Some of the world's largest and most powerful corporations and governments are putting up a fight.

But even they can't stop the unrelenting march of progress. Better financial systems are coming whether people like it or not.

And even the biggest crypto bulls should agree that the painful challenges along the way also come with a serious upside. Every technical flaw, fraudulent business practice, and unstable financial platform that is uncovered may trigger a crypto industry crisis but also brings attention to the problem and a long-term solution.

It's like crafting a solid government policy out of conservative, liberal, and independent points of view through Congressional debates and legal challenges. The final policy is stronger thanks to these challenges. The same will be true of the regulatory system for owning, trading, and creating cryptocurrencies.

Double down on the classics

Bitcoin and Ethereum have been around for more than a decade but their history as serious financial tools is much shorter. These are still early days of the blockchain-based business era, and there are probably many more scandals and crises ahead.

Just remember that the latest crisis isn't the end of the crypto world, and the next one won't be any different.

I'm not terribly interested in finding the next red-hot crypto idea in this environment. For every permanent winner, there are dozens of momentary flashes in the pan, bad ideas, and maybe even outright scams. Instead, this is the time to double down on the tried and true giants of the field.

  • Bitcoin is the closest thing to digital gold, with an inflation-proof mining mechanism and a grizzled security model.
  • Ethereum is the proverbial silver to Bitcoin's gold, with a robust platform for developing the next generation of financial tools and applications.
  • As the official blockchain network of the Web3 project, Polkadot (DOT -0.31%) looks like another essential component of this sea change.

Your preferences may differ, and it's always a good idea to double-check anybody's recommendations with your own research. But these are the three cryptocurrencies I want to buy whenever the crypto market takes another sudden dip. I don't mind skipping Shiba Inu and Dogecoin when Bitcoin, Ethereum, and Polkadot are on fire sale.