3 cryptocurrencies worth considering in any bear market

The bear market of 2022 was vicious, especially for those invested in high-growth and high-risk assets. The cryptocurrency sector was among the hardest hit, as a so-called crypto winter lasted through all four seasons of the year.

But given the incredible growth most top cryptocurrencies have experienced over the past decade, the assets warrant some attention from investors. These digital assets have produced excellent returns over the long term, despite their bouts of volatility. For those who take a truly long-term approach to portfolio construction – and don’t mind volatility – it can pay to have a small percentage of assets dedicated to crypto.

Investing in cryptocurrency isn’t for everyone, but for those looking to dip their toes in the water, here are three tokens worth considering in this bear market (or any bear market).

1. Bitcoin

Many investors consider a first-mover advantage important. Being the first cryptocurrency in the world has undoubtedly benefited Bitcoin (BTC 0.57%)which is the world’s largest crypto by market capitalization.

Here are some points in favor of viewing Bitcoin as a relatively defensive asset compared to other more speculative tokens:

• Decentralization: Bitcoin is decentralized, meaning no government or institution controls it. This gives more autonomy.
• Limited Supply: The maximum supply of Bitcoin that can ever exist is 21 million tokens. That cap helps protect the value from inflation.
• Transparency: All transactions on the Bitcoin network are recorded in a public ledger called the blockchain, which provides both transparency and security.
• Borderless: Bitcoin can be sent and received by anyone, anywhere in the world, making it a borderless currency.
• Low transaction fees: Bitcoin transactions have lower fees than traditional financial transactions.
• Potential to buy on a dip: Bitcoin has had a history of high volatility, which can create opportunities for investors looking for high returns.

The concept of holding Bitcoin as a way to protect one’s assets from the effects of market fluctuations and inflation is interesting. While crypto has traded with a high correlation to risk assets in recent years, there is still a diversification argument to be made for digital assets. Given Bitcoin’s size, prominence and historical performance, this token is likely to remain a go-to option not only for retail investors but also for institutions seeking diversification.

2. Ethereum

Ethereum (ETH 0.08%) is the world’s second largest blockchain network, and it has given rise to much of the utility that has been created in the crypto world. Most of the decentralized applications (dApps) that actually “do something” are somehow tied to Ethereum. Its rise to second place in the overall ranking among cryptos is generally attributed to the network being the first to use smart contracts on a massive scale.

Smart contracts enable the creation of custom tokens such as NFTs, allow lending and other contracts to take place on the blockchain, and have given rise to a whole range of potential crypto use cases across a variety of industries.

Ethereum’s developer community remains among the largest and most active in the crypto world. The network is among the best funded and best able to build and deploy innovative technologies. This has attracted one of the most active user communities in the crypto space, and strong network effects support this token’s continued rise.

Many altcoins have emerged to take market share from Ethereum. (And some have succeeded, including the one I’ll discuss below.) But for investors looking for a stable option in a volatile sector, Ethereum is a top pick to consider right now.

3. Landslide

Last on this list of cryptos you should consider buying in any bear market is Avalanche (AVAX 0.55%), another layer-1 smart contract network. Avalanche is considered a rival to Ethereum, although it has the added benefit of being able to work with Ethereum, which has helped drive its growth.

Decentralized application development on Avalanche has remained strong, evidenced by more than $920 million of total value locked (TVL) on the network at the time of writing. Although this number is significantly reduced from $11 billion in 2021, there is still evidence that there is a lot of activity on the Avalanche blockchain right now.

I’m a fan of cryptocurrencies that represent blockchain networks that actually create value for users. So far, Avalanche has proven to be one such project, offering low transaction fees and what Avalanche’s team says is the fastest time to completion of any blockchain.

Worth a small investment?

There is no such thing as a defensive asset in the crypto world. In fact, this sector is one that carries significant risk, and has outsized volatility compared to most other assets.

That said, Bitcoin, Ethereum, and Avalanche are among the top tokens I would choose for investors seeking a more stable upward trajectory over time. Those looking to add some exposure to the crypto world once valuations have dropped may want to at least add these tokens to a watchlist. This year’s rally has been impressive, and is indicative of the long-term historical movements seen in these tokens since their inception.

Nothing is certain and these symbols may have further to fall. However, for those who at least want to take a flyer, some small positions in these tokens will provide exposure to crypto’s upside if the sector rises again.