We're only a few days into 2024 and, boy, have things been volatile already. Various top cryptocurrencies have seen their valuations surge and plunge, reminiscent of the kinds of moves many investors in this space have grown accustomed to in years past.
Crypto does anything but move in a straight line; those looking for consistent "up and to the right" moves continue to be disappointed. And while there are certainly digital assets that have trended in this direction over long periods, shorter-term moves have proved to be less than predictable, to say the least.
So, as we kick off a new month (and a new year), let's dive into three cryptos with some clear fundamental drivers that make them worth buying for the longer term. If you're looking to hold over the next few years, these are the three picks I'd start with right now.
1. Bitcoin
It isn't easy to assemble a list of stalwart cryptocurrencies to anchor a portfolio without discussing Bitcoin (BTC -2.31%), the world's largest and most prominent cryptocurrency. It continues to hold a valuation that's worth roughly half that of the entire sector.
It typically sets the tone for how the entire market performs. Indeed, when many think of crypto or the crypto sector, it's really Bitcoin that comes to mind as representative of this space.
Thus, the massive impending catalyst from the expected approval of a spot Bitcoin exchange-traded fund (ETF) has many investors bullish on Bitcoin and many of its counterparts.
This approval could come as soon as Jan. 10. And while the Securities and Exchange Commission has fought hard against spot ETFs for this sector, many believe it's just a matter of time until yet another option is available for institutional investors to gain exposure to Bitcoin.
This catalyst, in combination with the next Bitcoin halving (set for some time in the next few months), has investors eagerly anticipating a big upside in 2024. Traditionally, halving events (where Bitcoin mining rewards are cut in half) lead to significant returns both before and after the official halving date. If history is our guide, and the momentum we saw to end last year continues, Bitcoin should have a shot at potentially challenging its previous highs.
2. Ethereum
In second place in the cryptocurrency rankings by market capitalization, Ethereum (ETH -0.66%) remains a solid long-term pick. That's particularly true for investors who believe that the smart-contract-derived decentralized applications (dApps) that live on the blockchain will drive the sort of innovation and disruption that could create tremendous value over time.
The possibilities afforded to investors, users, and the entire market from these dApps are essentially limitless. And while some are focused on areas such as gaming, trading, and speculation, there are plenty of financial applications that create real-world value.
For many investors, the world of so-called DeFi (decentralized finance) is where the long-term value in crypto will be created. Ethereum's network is where many of the most influential DeFi applications live, and that's unlikely to change.
That's because Ethereum has built out a massive ecosystem, driven by its first-mover advantage in smart contracts. Being first doesn't always guarantee success (and the next pick on this list is an intriguing competitor). But it does provide network effects that are hard to overcome, particularly when so many users have grown accustomed to being able to transact within one ecosystem to handle all their needs.
If we continue to see the sort of growth in total value locked (TVL) we saw to end 2023, the DeFi space (and Ethereum by extension) could be well positioned for growth in January and beyond.
3. Solana
Rounding out this list, we have Solana (SOL -5.58%), an Ethereum competitor and the token I was hinting at earlier.
Solana's value is mainly derived from its technical architecture, which provides a speed and cost advantage over Ethereum. For developers looking to mint and sell non-fungible tokens (NFTs) or projects that benefit from smaller dollar-value transactions, Solana's ecosystem has become a preferable option. This has led to strong adoption by certain users and created its own set of network effects over time.
Solana is among the Ethereum competitors I remain most bullish on over the long term, for this reason: If investors place a greater value on speed and cost than they do on stability (where Solana is lacking), this is one altcoin that could really outperform.
However, herein lies the rub for Solana. Its lightning-fast and low-cost network has seen outages and downtime in the past. Thus, reliability and security are the sustainable tailwinds Solana will need for its valuation to see the sort of growth we saw in years like 2021.
But with fewer issues over the past year, and a team that appears dedicated to focusing on security and stability, this is a token I think has the most upside of the three (albeit with a higher risk profile).
