The cryptocurrency market plunged as much as 10% on Monday to add to the sell-off that has been brewing for weeks. Three of the five largest cryptocurrencies – Bitcoin (CRYPTO: BTC)And Ethereum (CRYPTO: ETH), And Solana (CRYPTO: SOL) They are down 33%, 23% and 41%, respectively, from their all-time highs.
Investors looking out into the Red Sea may be wondering what they should do now to prepare themselves for 2022. Let’s take a look at why the long-term investment thesis for Bitcoin, Ethereum, and Solana remains the same and which cryptocurrency might be best for you.
Too fast to bounce?
One of the reasons for the cryptocurrency market’s decline is that it rebounded so quickly from the sell-off. Regulatory concerns, crackdowns in India and China, and additional competition in the cryptocurrency industry, as a whole, were among some of the big overlooked risks such as Bitcoin, Ethereum and Solana, all of which reached all-time highs in the first half of November. However, since then, there has been a decline in regulatory uncertainty – that is, when the US Securities and Exchange Commission (SEC) approved the first US Bitcoin-traded fund (ETF), which was launched on October 19.
Another threat looming in the cryptocurrency market is speculation of the crypto winter, a prolonged period of stagnation or often downturn in the cryptocurrency markets that lasted in the past 1-2 years. The idea that a crypto winter may be around the corner or that it has already begun is a deterrent for short to medium term traders looking to play in the markets.
However, the long-term gains from Bitcoin, Ethereum, and Solana are likely life-changing, even when you factor in all the selling. Like most profitable assets, the real money was made from the people who held these top cryptocurrencies through thick and thin, not from traders diving in and out of the market.
The best cryptocurrency purchases right now
There are good arguments for buying Bitcoin, Ethereum, and Solana for sale. Most investors are probably best suited to diversify into all three cryptocurrencies. However, the weights of each will likely depend on your personal interest and risk tolerance.
Solana’s 41% drop in just over a month stands out for growth investors interested in solutions that are currently disrupting the industry. It can be said that Solana offers the best benefit of any network at the moment due to its high speed and low fees. These traits make Solana a better platform for developers who build an app that should be cheap and fast – like non-fungible mintings (NFTs).
In comparison, Ethereum is more established, decentralized, and slower, but generally more secure and suited to applications that place a premium on security over cost or speed. Given their strengths and weaknesses, Solana and Ethereum can coexist and grow together. One day, they could become interoperable as their networks expand and mature.
Bitcoin is still the safest cryptocurrency. The Bitcoin investment thesis is stronger than ever as more countries and companies realize its value and even look to hold it on their balance sheets. It is also maturing into a great inflation hedge that is arguably better than gold.
Another option that has not been talked about is simply investing in high-yield stablecoins. Stablecoins act as secure payment methods that provide liquidity and stability to cryptocurrency exchanges. Although riskier than savings accounts, some stablecoins are backed by dollars against the real US dollar. Stablecoin interest rates can exceed 8% or even 9% on platforms like BlockFi.
Tends to collide
Simply talking about the tendency to crash and taking advantage of lower asset prices is different, but buying the dip is quite another, just to watch the prices drop further. Investors interested in cryptocurrency will benefit from understanding that even if the long-term thesis for Bitcoin, Ethereum, and Solana is sound, there is no indication of how far each crypto could go down in the short-term.
Long-term industry watchers will remember that in 2018, Bitcoin suffered a decline of nearly 80% from its all-time high. Bitcoin is definitely more sophisticated and stable now than it was back then. But wild spikes to the upside and downside strikes to the downside remain common in the cryptocurrency market.
Investors looking to lay out their crypto wallets for 2022 can take advantage of buying Bitcoin, Ethereum, and Solana. With its well-established position as the leading blockchain company that supports decentralized finance, Ethereum is arguably the best buy out of them all and is likely to attract risk-averse and risk-taking investors for its solid reputation and incredible upside potential.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.