After a challenging 2022, the cryptocurrency market has experienced a much-needed resurgence in the first half of 2023. With the collective market cap reclaiming the $1 trillion mark once again and multiple cryptocurrencies looking as though they have bottomed out, last year's crypto winter just might be thawing.
With a vast array of cryptocurrencies available and most providing little to no utility, it becomes crucial to identify the top choices that offer both stability and growth. While the constant influx of new tokens promising to be the next big thing can be tempting, there are truly just two cryptocurrencies investors should prioritize: Bitcoin (BTC 0.80%) and Ethereum (ETH 4.72%).
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The unwavering constant
Despite the industry's volatile nature, Bitcoin has remained a constant force in the cryptocurrency market for more than a decade. It has weathered the storms of previous market cycles and proven its resilience time and again.
As turbulence hit crypto in 2022, Bitcoin's superiority once again became clear. Since August 2022, Bitcoin's value relative to the rest of the crypto market has grown by 10%, representing 51% of the total crypto market value today. This resurgence comes after investor appetite for riskier and speculative altcoins diminished in preference of Bitcoin's reliability and resilience.
Adding to Bitcoin's perception as a safe haven, there have been a handful of developments this year that could spur further demand for its limited supply. The rise of Bitcoin-based non-fungible tokens (NFTs), known as Ordinals, has been remarkable. Since their launch in January, Ordinals have experienced soaring demand. In the past 30 days alone, Bitcoin has recorded the second-highest NFT volume across all blockchains, with the top-10 most expensive NFTs being exclusively Bitcoin-based.
Furthermore, there is growing anticipation surrounding the approval of a Bitcoin ETF, something yet to occur in the United States. With applications sponsored by Wall Street giants such as BlackRock, Fidelity, and Invesco, the introduction of institutions to Bitcoin could add new levels of demand to a market historically dominated by retail investors.
The DeFi powerhouse
While Bitcoin often takes center stage, Ethereum has maintained its position as one of the most popular and influential cryptocurrencies. Ethereum's key differentiating factor is its programmability through smart contracts, which enable the automatic transfer of value when predefined conditions are met. This programmability has propelled Ethereum to become the foundation for a burgeoning and lucrative economy known as decentralized finance (DeFi).
While there are other DeFi-capable blockchains, their attempts to grab market share from Ethereum are futile. Likely benefiting from a first-mover's advantage as well as a robust developer toolkit, Ethereum accounts for nearly 60% of the total value in DeFi.
Moreover, Ethereum's capabilities are beginning to be recognized by traditional financial firms. Last year, JPMorgan Chase successfully tokenized bonds on the Ethereum blockchain, leveraging its capabilities for faster and more transparent transactions. Additionally, just this June the Bank of China surprised many by issuing $28 million worth of Ethereum-based tokenized securities.
Simplifying the crypto landscape
In the ever-changing -- and at times volatile -- world of cryptocurrencies, simplicity is a key driver of success. Despite there being thousands of cryptocurrencies, Bitcoin and Ethereum provide investors with adequate exposure to the asset class since these two cryptocurrencies account for approximately 75% of the total crypto market value.
Bitcoin and Ethereum stand out in the cryptocurrency market, not only for their stability but also their strong growth potential. Bitcoin's evolving perception as more than just a store of value, along with increasing institutional demand, has the potential to drive its price to new heights. On the other hand, Ethereum's role in blurring the lines between traditional and decentralized finance solidifies its position as the leading blockchain for application development. With their proven track records and ongoing innovation, Bitcoin and Ethereum provide investors with a rare combination of reliability and long-term potential.
