For the year, every major cryptocurrency is getting hit hard. But some cryptocurrencies are getting hit harder than others. Ethereum (ETH 0.37%), for example, is down 35%, while Solana (SOL 1.49%) is down 34%.
So is it worth buying the dip on these beaten-down cryptocurrencies? Or has something fundamentally changed in the way investors view these cryptocurrencies?
When to buy the dip
Generally speaking, a strategy of buying the dip only works if a cryptocurrency is in the midst of a long-term uptrend. There will be pullbacks of 10% or more along the way, and this is when it can make sense to buy at a lower price. Think of each dip as an opportunity to buy your favorite cryptocurrency at a temporary 10% discount before it goes back to its regular price.
Image source: Getty Images.
This strategy has worked splendidly with cryptocurrencies such as Ethereum and Solana in the past, so it's no surprise that some crypto investors are now salivating at the chance to buy these cryptocurrencies at a whopping 35% discount.
Has something changed in the investment thesis?
But here's the thing: Investors are starting to change the way they view Layer-1 blockchain networks such as Ethereum and Solana. Previously, they were viewed as building blocks of the crypto economy.
Everything being built with blockchain technology -- including decentralized apps and decentralized exchanges -- was being built on top of these networks. That's what made them so valuable, especially in the minds of Silicon Valley investors used to talking about network effects.
Increasingly, however, investors are starting to view these cryptocurrencies as nothing more than open-source software. And indeed, if you think about what Ethereum and Solana really are, they can be viewed as decentralized, public, and highly transparent codebases. Anyone can build on top of them, and they are not owned by any central entity.
CRYPTO: ETH
Key Data Points
Given that software stocks are getting absolutely crushed right now, that helps to explain why Ethereum and Solana are getting clobbered worse than other cryptocurrencies. In the minds of many investors, they are nothing more than risky bets on the future of software.
Fear and greed in the crypto market
It's become fashionable to question the purpose of each and every cryptocurrency, including Bitcoin (BTC 0.57%). Quite simply, investors are scared right now, and they're looking to de-risk and de-leverage. You can see this in the Crypto Fear and Greed Index: it now stands at 5 out of 100. That's about as close to full-on panic as you can get.
CRYPTO: SOL
Key Data Points
All of this leads me to think that crypto investors are overreacting. In my view, Ethereum and Solana are still two key building blocks of the crypto economy. For that reason, I'm doing what crypto investors have been doing for years: buying the dip. While these two cryptocurrencies may have yet further to fall in 2026, the fundamental uptrend will soon continue, just as it has for the past decade.
