The past 30 days have roiled the crypto market. On top of concerns about the macroeconomic environment, fresh regulatory uncertainty now hangs over some of the biggest tokens. As a result, some top cryptos have fallen 12% or more over the past month.
But guess what? That opens up a number of buying opportunities. The key, of course, is trying to figure out which cryptos have been unfairly driven down past their fair values and are worth buying on the dip. Two that stand out to me as fitting that description are Solana (CRYPTO: SOL) and Avalanche (CRYPTO: AVAX), both of which are Layer 1 blockchain networks.
Solana
Solana has fallen by 12% over the past 30 days, largely in response to the threat of regulatory action. Earlier this month, the Securities and Exchange Commission (SEC) filed lawsuits against two top cryptocurrency exchanges: Binance (CRYPTO: BNB) and Coinbase (COIN +3.98%). Among the claims in those lawsuits was that the companies were operating unregistered securities trading platforms that were facilitating the buying and selling of unregistered securities. The SEC named Solana as one of the unregistered securities that these exchanges were improperly offering to customers.
As a result, market sentiment turned against Solana immediately: It fell 20% in the span of just 24 hours.
However, what if the market overreacted? After all, the SEC has not yet filed an enforcement action against Solana. Moreover, Solana has already responded, suggesting that the SEC might not have a real case against it. And finally, the broader crypto industry, led by Coinbase, appears to be mobilizing against what it sees as regulatory overreach by the SEC. A number of U.S. lawmakers appear to be sympathetic to the concerns of the crypto industry, and that leads me to think that the situation for Solana might be less dire than it seems.
Image source: Getty Images.
But that's only half of the reason I think Solana could be ready to pop soon. The other factor involves improving metrics for its blockchain.
Take the non-fungible token (NFT) market, for example. At the beginning of the year, it looked like Solana was in real trouble, as a number of top NFT collections were planning to migrate away from it. But NFT trading volume on Solana has spiked recently. And, even better, floor prices (i.e., the minimum prices that people are willing to sell for) of Solana NFTs appear to be on the rise, suggesting improving health for that blockchain's NFT ecosystem.
Against this backdrop, Solana is still rolling out new growth initiatives. In April, for example, it unveiled the next stage in its mobile crypto strategy: a new $1,000 "crypto phone" known as the Saga. As Solana sees it, the future of crypto is mobile, and the Saga smartphone will be the key to drawing potentially millions of new users to its blockchain.
Avalanche
Avalanche, which also is down 12% over the past 30 days, also has been buried by the bad news coming out of the crypto industry. At a time when rival Layer 1 blockchains like Solana are down 12% or more, it makes sense that traders are selling off Avalanche as well. But this could be a clear case of market overreaction.
Just look at some of its recent underlying metrics. Avalanche is still gaining ground in the decentralized finance (DeFi) sector, and now ranks seventh in terms of total value locked (TVL), which is a key metric measuring overall DeFi strength. Moreover, daily active addresses and daily transaction volumes on the Avalanche blockchain are on the rise. So, from my vantage point, it looks like Avalanche is finally starting to emerge from its long crypto winter hibernation.
On top of that, there's a strong long-term growth catalyst for Avalanche. In January, it partnered with Amazon to deliver blockchain solutions to the cloud-computing customers of Amazon Web Services. And it has a similar deal in place with Tencent Cloud, the cloud computing unit of Chinese tech titan Tencent Holdings. We're still waiting on results from these partnerships, but they certainly help create an interesting long-term growth scenario for Avalanche.
Solana or Avalanche?
Solana and Avalanche are similar in many ways. Both are top Layer 1 blockchain networks that have been touted as "Ethereum-killers." Both were down by more than 90% last year, and both are attempting to make big comebacks this year. Even though Solana faces much more regulatory risk than Avalanche right now, it's still one of my top picks for a crypto that could pop in the second half of 2023.
