Amidst lingering uncertainty in the crypto market, a few cryptos stand out as potential investment targets headed into the second half of 2023. Two that stand out for me are Bitcoin (BTC -2.31%) and Cardano (ADA -2.94%).
Both cryptos have superior long-term growth catalysts, and both could get a big bump from any change in the Security and Exchange Commission's current crackdown on crypto. Let's take a closer look at both.
1. Bitcoin
Bitcoin is already up more than 80% year to date, but the best may be yet to come. One key factor is the so-called BlackRock Rally that touched off in mid-June after BlackRock, the world's largest asset manager, announced plans for a new spot Bitcoin exchange-traded fund (ETF).
Other institutions soon followed with their own spot Bitcoin ETF applications. While the SEC has since countered that these ETF applications won't be approved in current form, there is clearly plenty of pent-up investor demand for new ways to invest in Bitcoin, and BlackRock has already refiled its application.
On top of that, Bitcoin is less than 12 months away from its next halving event, which is now scheduled for April 2024. With each halving, the reward paid to Bitcoin miners is cut in half. Past halving events for Bitcoin in 2012, 2016, and 2020 have coincided with huge price increases for the crypto, so investors are hopeful that a similar price phenomenon will occur in 2024.
The big caveat here, of course, is that past performance is no guarantee of future results. Nevertheless, many investors still expect some sort of Bitcoin rally to kick off this year in anticipation of the April 2024 halving event.
Image source: Getty Images.
Zoom out to a 30,000-foot view of Bitcoin, and the picture is even more attractive. As Cathie Wood of Ark Invest points out, the long-term growth potential of Bitcoin could make this a $1 million crypto by 2030. Cathie Wood has identified eight different use cases for Bitcoin, with each of these use cases capable of driving growth.
Simply stated, Bitcoin is becoming an increasingly important part of the global financial system, and as such, its value will continue to grow beyond just payments.
2. Cardano
Until mid-April, Cardano was largely keeping pace with Bitcoin and was up 80% for the year. But then came a disastrous June. When the SEC filed its lawsuits against cryptocurrency exchanges Coinbase Global and Binance, it included a reference to Cardano as one of the "unregistered securities" that these exchanges were offering to customers.
Almost immediately, the market panicked, and a rapid sell-off commenced. Thus, Cardano is still down almost 20% over the past 30 days.
So Cardano comes with a tremendous amount of regulatory risk. But I think that the market has overreacted, and that Cardano could be ready for a turnaround. As a potential sign that the situation has stabilized, Cardano is up 8% in the past seven days.
One key consideration here is that the SEC has not gone after Cardano directly. And Cardano, more so than just about any other top crypto, has taken steps to protect itself against a possible SEC legal challenge.
The long-term growth catalyst for Cardano involves decentralized finance (DeFi), one of the most important sectors of the blockchain world. Heading into 2023, DeFi was one of the priorities for Cardano. And there has been a lot to get excited about this year. There has been a significant bump in key DeFi metrics, as well as the launch of new products for the Cardano DeFi ecosystem.
All of this would seem to suggest that Cardano has plenty of upside potential ahead.
The SEC risk factor
For both Bitcoin and Cardano, the SEC remains a big risk factor. While the SEC shows no intention of going after Bitcoin directly, it has drawn a line in the sand, saying that there will be no spot Bitcoin ETFs for the foreseeable future.
So any future BlackRock-inspired rally should remain muted until the regulatory situation improves. And of course, for Cardano, the regulatory situation poses much more of an existential risk.
However, if you are willing to take on this potential regulatory risk, both Bitcoin and Cardano are appealing investment targets for July. If the regulatory outlook improves, there may be plenty more upside to come for both in the second half of 2023.
