- It isn't clear whether the crypto price slump is over, or if there's more pain to come. But there are still opportunities for long-term investors.
- Now's a good time to focus on more established cryptocurrencies such as Avalanche, Ethereum, The Graph, and Enjin.
A long-term perspective makes it easier to weather short-term slumps.
The cryptocurrency market got off to a rough start in 2022, with the total market cap dropping almost 50% from its November all-time highs. Many people are wondering if Bitcoin (BTC) has finally bottomed out. And, sadly, it's too soon to say.
Market leader Bitcoin has an outsized impact on the rest of the market. If the crypto king is starting to edge its way back upward, it's true that many altcoins are likely to follow. However, that's by no means certain. President Biden is likely to make some crypto moves soon, which could mean more short-term pain for crypto investors.
Continued uncertainty means February is a good time to stick to more established cryptos. We may see prices fall further, but the fact that many are trading significantly lower than previous highs is another reason to give some old favorites a bit of attention.
Here are four coins to watch in February, which are available from many top cryptocurrency exchanges.
1. Avalanche (AVAX)
Avalanche is one of the many smart-contract cryptos that have grown in popularity in the past year. Ethereum's (ETH) network congestion and high fees have pushed developers and investors to look for alternatives, and several are coming out ahead of the game.
One is Avalanche, which boasts it is the fastest crypto in terms of finality. Finality is the point at which a transaction can't be reversed, and it's different from the processing speed. The best way to think of it is the way you might make a card payment at a store, but then have the payment listed as pending on your account for a few days. Avalanche would mean practically no "pending" time.
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This fast finality has made Avalanche a popular option for decentralized finance apps. According to DeFi Llama, it already has more total value locked on its platform than Solana (SOL) -- one of 2021's superstar cryptos. Plus, Solana's had some technical issues recently, which may dampen its next growth spurt.
2. The Graph (GRT)
The Graph is a crypto data indexer that powers many decentralized applications. It provides a fast and secure way to query data across different blockchain projects. Originally focused on Ethereum, The Graph is expanding its indexing capabilities to other smart contract cryptos. It announced a partnership with NEAR Protocol (NEAR) last year, which is now coming to fruition. The two cryptos just announced the NEAR Pathway is live, and they're teaching developers how to use it and how it can contribute to the evolution of Web 3.
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3. Enjin (ENJ)
Non-fungible tokens (NFTs) took off in 2021, and there's a lot of hype in the NFT market right now. But look beyond the crazy headlines of people spending millions of dollars on individual NFTs. These digital certificates of ownership could change the way we own things online. For example, NFTs are the building blocks of the metaverse -- they mean the things people buy in a metaverse or gaming platform actually belong to them, not the platform they bought them on. Or they might allow a musician to sell their work directly to the public and claim a royalty each time that work is sold.
I don't advocate buying an NFT just for the sake of owning an NFT. That would be like buying a book you have no interest in reading just so you could have a book. But I would urge you to look closely at cryptos like Enjin that power NFTs. Once the craziness fades, those are the projects most likely to hold their value.
4. Ethereum (ETH)
I'll admit, I'm never a fan of altcoin lists that include Ethereum since the second-biggest cryptocurrency is extremely well established. But if crypto prices do continue to struggle, the bigger coins have the best chance of long-term survival. Plus, at the time of writing, ETH was trading at around $2,500 -- a big drop from its high of almost $4,900 on Nov. 16. As it makes progress toward its Eth 2 upgrade, many analysts are optimistic it can not only reach but also surpass those highs in the longer term.
That said, the upgrade presents a big challenge for Ethereum. It's much easier to build a new engine from scratch than to try to rebuild it while it's still running, which is essentially what Ethereum is trying to do. It is a staged upgrade, and we can expect some significant progress this year, but the work won't be fully finished until at least 2023. In the meantime, other cryptocurrencies are sure to take more market share. But given about 60% of all the cash on DeFi is still on Ethereum's network, it will take a lot to topple this giant.
Tread with caution
The recent slump in cryptocurrency prices was an important reminder of how volatile this market can be. Blockchain technology has a huge amount of potential, but there are also many unknowns about how (and whether) it will reach that potential. Specifically, it is hard to know which individual cryptocurrencies will survive long term -- and what the impact of a prolonged price dip may be.
As a result, it's key to only invest money you can afford to lose and research any crypto investment through a long-term lens. Think about how it compares with the competition, and pay particular attention to wider regulatory and economic factors. These could push the current slump into what some are already calling a crypto winter. The coins above are on my radar, as I think they are good long-term bets, but only you know your financial situation and investment priorities.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Emma Newbery owns Bitcoin, Ethereum, Avalanche, The Graph, Enjin, NEAR Protocol, and Solana.
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