After a promising start to the year, the crypto market is now in a deep funk. There's no other way to describe its recent performance. Of the top 50 cryptocurrencies by market cap, only a handful are in the green over the past 30 days. Everywhere else, there is a sea of red.
But don't despair. There's one top cryptocurrency that's still worth buying. In fact, it is likely to outperform the broader market over both the short term and the long term. Yes, I'm talking about Bitcoin (BTC 1.25%).
Bitcoin vs. altcoins
Let's start by surveying the recent carnage in the crypto market. Over the past 30 days, Bitcoin is down nearly 10%, and some are now concerned that the world's most popular cryptocurrency might dip below the $100,000 mark.
Image source: Getty Images.
But if you zoom out, an entirely different picture emerges. Major altcoins are down anywhere from 15% to 30% across the board. Ethereum, for example, is down 15%. Solana is down 20%, XRP is down 25%, and Cardano is down 30%.
And don't even think about investing in meme coins right now. Shiba Inu is down 25%, Dogecoin is down 30%, and Pepe is down 40%.
Against that backdrop, Bitcoin's performance over the past 30 days becomes much less disappointing. It's hard to call Bitcoin a "store of value" right now, given its recent decline. But it is definitely holding up better than other top cryptocurrencies. For the year, Bitcoin is still up nearly 15%.
The debasement trade
One reason why Bitcoin is holding up better than major altcoins is something called the "debasement trade." This trade is currently the newest obsession on Wall Street: moving out of fiat currencies and into gold, precious metals, and yes, Bitcoin.
For the casual investor, Bitcoin wouldn't even seem to belong in the same sentence as gold. But here's the thing: Institutional investors and big hedge fund managers have latched onto the narrative of Bitcoin as "digital gold."
Just like physical gold, Bitcoin possesses tremendous scarcity. Only 21 million coins can ever exist, and nearly 20 million are already in circulation. An algorithm carefully controls the rate of new Bitcoin creation, and this rate of new emission is actually getting slower and slower over time. This is the result of the Bitcoin halving that takes place every four years.
In short, there's no way to create more Bitcoin than what is made possible via the algorithm. No central bank, sovereign authority, or Wall Street institution can create new Bitcoin out of thin air.
Contrast that to fiat currencies such as the U.S. dollar. For better or for worse, you can always print more money. And that creates the risk of debasing the currency even further.
That's why the "debasement trade" works. The only way to pay down huge deficits is by printing more money. And that's why investors are now choosing to ditch dollars for Bitcoin.
Buy the dip on Bitcoin
Admittedly, there have been some severe drawdowns in Bitcoin over the past decade. In 2022, for example, Bitcoin lost 64% of its value. In 2018, Bitcoin lost 74% of its value. And in 2014, Bitcoin lost 58% of its value. But each time, buying the dip on Bitcoin has been a smart move.
After all, here we are today, talking about $100,000 Bitcoin. Ever since Bitcoin crossed through the $1,000 mark in 2017, the overall trend has been a distinct upward trajectory. From the $1,000 price point, Bitcoin rallied to $10,000, and then to $100,000.
Investors who bought the dip each time have been richly rewarded. Some early Bitcoin investors have seen 100-fold and even 1,000-fold returns on their investment. Even recent Bitcoin investors who started accumulating during the crypto winter of 2022 have seen a more than sixfold return on investment.
So view the current pullback in Bitcoin as a buying opportunity. If history is any guide, buying Bitcoin now at a discounted price of $105,000 will pay off big later.
