The US Federal Reserve’s intent to raise interest rates to tame inflation is causing investors to flee risky assets. As a result, the cryptocurrency market has taken a hit over the past few months, going from nearly $3 trillion in value to under $1 trillion as of this writing. When the digital asset market remains depressed for an extended period of time, dubbed a crypto winter, it offers long-term investors an opportunity to buy top tokens at discounted prices.
According to a team of Motley Fool contributors Bitcoin (CRYPT: BTC), ether (CRYPT: ETH)and Solana (CRYPTO:SOL) are three cryptocurrencies to buy and hold during a crypto winter.
RJ Fulton (Bitcoin): There aren’t many cryptocurrencies that can claim to have survived multiple crypto winters. For this reason alone, Bitcoin deserves to be part of every portfolio during prolonged crypto market downturns.
In addition to Bitcoin’s proven track record through crypto winter, what’s more important is how it performs once market conditions are more ideal. Let’s take a look back at the last crypto winter. Most people agree that the previous crypto winter happened in 2018. Although bitcoin hit an all-time high of just under $20,000 in December 2017, bitcoin and many other cryptocurrencies continued to post lower lows throughout most of 2018. Eventually, Bitcoin bottomed at around $3,000 in late 2018.
It’s at the bottom when there’s the most to gain. Well, you shouldn’t try to time a market, but investors who invested consistently in bitcoin throughout 2018 would have been very well positioned for amazing returns when the bull market returns. Just as a quick reference, if you had invested $1,000 in Bitcoin when it bottomed in December 2018, that same investment would ultimately have been worth nearly $20,000, assuming you held onto it until it ran out in November 2021 hit a new all-time high below $70,000.
If you look back at other crypto winters like 2014, a similar pattern emerges. After hitting a previous all-time high of just under $1,000 in December 2013, Bitcoin endured a dry spell throughout 2014 and most of 2015. From that $1,000 mark, Bitcoin slipped to just a few hundred dollars in 2015. If you had had enough conviction to invest from that $1,000 bottom in 2015 and hold it to the next all-time high, which hit nearly $20,000 in December 2017, your investment would have grown to around $75,000.
Of course, hindsight is always 20/20, but the aim here is to show that Bitcoin is no stranger to crypto winters and consistently delivers returns once downturns are over. Conditions today are roughly the same as previous crypto winters. Those who add Bitcoin to their portfolios when market sentiment is in the doldrums have the most to gain when conditions improve. For that reason alone, it should almost be seen as a necessity for crypto investors to add more bitcoin to their portfolios during crypto winters.
Neil Patel (Ether): I’m not going to get style points for originality here, but that’s totally fine when you’re talking about an industry and asset class as nascent and volatile as cryptocurrencies. With that in mind, I believe investors should do so look at Ethereum to survive a possible crypto winter.
Ethereum was unveiled to the public in 2015 and since then has achieved a remarkable return of almost 48,000%, which is slightly overwhelming S&P500‘s performance at the same time. While Bitcoin was created solely as a peer-to-peer global payments network, by adopting it, Ethereum has taken what a blockchain can do to the next level smart contracts. These are software programs that run themselves when two parties meet the necessary terms of the contract. It’s an innovation that could pave the way for Ethereum to become the world’s decentralized computer, allowing two unknown people to engage and transact business with each other in a way that wasn’t possible before.
Examples of some popular decentralized applications (dApps) running on the Ethereum network include but are not limited to decentralized funding (DeFi) protocols and marketplaces for non-fungible tokens (NFT). As of July 27, the total value of Ethereum’s blockchain was $55.8 billion, the highest of any cryptocurrency. Other dApps range from governance and identity to gaming and social. The platform’s deep developer network is an optimistic sign of its ultimate success.
Throughout its history, Ethereum has operated a Proof-of-Work (PoW) consensus mechanism. This means that so-called miners have to use a lot of computing power to validate transactions on the blockchain. It is known to be slow, expensive and energy intensive. With the upcoming merger, scheduled for September, Ethereum is set to move to a proof-of-stake model, allowing token holders to freeze their holdings to earn the right to validate transactions. It is said to be faster and cheaper and, if implemented without major issues, could be a massive catalyst for the price of Ether, Ethereum’s native token.
If a decade from now we live in a world where cryptocurrencies actually have valuable utility and make up a larger part of our daily lives, then it’s hard to see that Ethereum isn’t among the top cryptos out there.
Michael Byrne (Solana): If you’re looking to bundle up and hunker down to withstand the elements and survive a crypto winter, it’s not the time to gamble on the most speculative cryptos with weak use cases. In this environment, I’m looking to add to my positions in some of the most stable projects across all asset classes that have what it takes to survive the bear market and thrive when it’s over. I want to invest in cryptos that people are actually using and have plenty of money in their war chests. A prime example is Solana: when a project with Solana’s provider and user base is down nearly 80% year-to-date, there’s no need to speculate further down the risk curve as to when you can buy this top crypto at a discount.
Solana now has over 1,800 validators, showing that many people are participating in the Solana network – boding well for the health of the Solana ecosystem. This sum trumps that of other popular blockchains such as e.g avalanche, Speckleand cosmos and only follows Ethereum in terms of proof-of-stake blockchains. According to crypto analytics firm Messari, there were an average of about 320,000 active unique fee payers (unique accounts that pay for one or more transactions per day) in the second quarter of 2022.
The fact that Solana Labs is developing its own mobile phone is a testament to the strength and depth of the development team Solana has at its disposal. Few other cryptos have the resources to undertake a project of this magnitude. And because several are from Solana’s leaders, including co-founder Anatoly Yakovenko Qualcomm, which makes chips for mobile phones, there is reason to believe that they are uniquely positioned to achieve this. According to Solana Mobile, the phone, named Saga, will ship in early 2023.
With significant venture capital backing, Solana has plenty of capital to weather the winter and implement new projects. In June, as much of the crypto market collapsed, Solana Ventures and the Solana Foundation launched a new $100 million fund to allocate capital to Web3 startups in South Korea, with a focus on gaming, DeFi, and non-fungible tokens .
Solana has the funding, the talented team behind it, and the sizable user base to not just survive a crypto winter, but thrive.
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Michael Byrne has positions in Bitcoin, Ethereum and Solana. Neil Patel has positions in Bitcoin and Ethereum. RJ Fulton has positions in Bitcoin, Ethereum and Solana. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Cosmos, Ethereum, Qualcomm, and Solana. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.