The recent pullback in the crypto market could be the perfect opportunity to buy the dip in undervalued cryptos. But which ones?
Two cryptos on my radar right now are Bitcoin (BTC +0.46%) and Solana (SOL +5.55%). Both started off the year with tremendous momentum, but are now trading a steep discount from where they were just a month ago. Let's take a closer look at the case for buying them now.
1. Bitcoin
Bitcoin seemed to be a no-brainer crypto investment at the beginning of January. At that time, Bitcoin was trading around $45,000, and impending SEC approval of the new spot Bitcoin ETFs was supposed to send the price of Bitcoin soaring. But that simply has not been the case. Bitcoin now trades under $40,000, and concerns are mounting that the "buy the rumor, sell the news" phenomenon could continue to send Bitcoin lower.
Image source: Getty Images.
But that's OK. Bitcoin has a second catalyst in the works that could ultimately unlock much more value: the next Bitcoin halving. This event is now scheduled for April 2024, and if everything goes according to plan (a big "if"), it could be huge for Bitcoin.
That's because Bitcoin has had three previous halving events (2012, 2016, and 2020), and each one has been spectacular. In 2020, for example, the halving eventually propelled Bitcoin to an all-time high of $69,000 per coin. The thinking is that we could soon see another all-time high for Bitcoin at the $100,000 mark or higher by the end of 2024.
CRYPTO: BTC
Key Data Points
Of course, past performance is no guarantee of future performance, so just be careful of expecting too much, too soon. Typically, every Bitcoin halving cycle 's bullish phase lasts for 12 to 18 months, so it might be sometime in 2025 before Bitcoin blasts off into the stratosphere.
The Bitcoin halving was once an event entirely reserved for crypto enthusiasts only, but what is truly remarkable this time around is how deeply big-name investors are buying into the idea of the halving. That gives me more confidence that this catalyst will not disappoint.
2. Solana
Similar to Bitcoin, Solana seemed to be a no-brainer crypto investment for 2024. At one point last year, Solana was up more than 1,000% and seemed to be unstoppable. With just one week to go until the new year, Solana was trading for over $120. So it seems almost unfathomable that Solana is now trading around $80.
Two factors seem to be behind this substantial drop in value. For one, all the hype around the new Bitcoin ETFs has meant less institutional money flowing into Solana. That has placed a cap on just how much higher Solana can go over the short term. At one point in January, Bitcoin accounted for nearly 98% of all institutional money flowing into crypto.
Secondly, the whole "Solana is the next Ethereum (ETH 0.56%)" argument seems to have been turned on its head. The new narrative apparently is "Ethereum is the next Ethereum." There's buzz building over a new speed-boosting Ethereum blockchain upgrade, as well as new hype over a potential spot Ethereum ETF.
According to this narrative, investor money will flood into Ethereum as soon as the SEC approves this new ETF. From my perspective, though, investors are much less excited about an Ethereum ETF than a Bitcoin ETF.
CRYPTO: SOL
Key Data Points
Long story short, this could be a perfect buy-the-dip opportunity for Solana while everyone else is focused on Ethereum. Cathie Wood of Ark Invest recently appeared on CNBC, making a bullish case for why Solana is a superior investment to Ethereum. Nothing has changed here. It's still faster and more cost-efficient.
And I would argue that Solana is now innovating at a much faster pace than Ethereum. Solana now has a mobile crypto strategy that appears to be picking up steam. The Saga "crypto phone" officially launched last April, and Solana will launch a new, lower-priced version this year. At the same time, Solana is gaining ground with its blockchain payment strategy, thanks to a new partnership with Visa.
Risk factors
It's important to point out that both Bitcoin and Solana -- like all cryptos -- are very volatile, risky assets. In terms of overall risk-reward profile, though, Bitcoin is likely a "safer" investment than Solana. It now has increasing approval from Wall Street (with a few notable exceptions, such as Jamie Dimon). And it has a much longer track record of delivering market-beating performance than Solana.
That being said, both cryptos are worthy of a closer look. Short-term factors appear to have pushed down their prices in January, but their long-term outlook remains relatively unchanged. I'm still bullish on Bitcoin as the future of digital money, and I see Solana as the first-ever smart contracts blockchain able to take on Ethereum on its digital home turf -- and win.
