Bear markets are nothing new in crypto. Meanwhile S&P 500: Having experienced gradual growth since the Great Recession, with just one year of decline between 2009 and 2021, the cryptocurrency economy has gone through roughly three bear markets over the same period. Most of those bear markets have produced declines of more than 70%.
However, despite these huge price swings, the cryptocurrency asset class has moved away from just one cryptocurrency, Bitcoin: (BTH: -0.06%), thousands of people, now worth more than $800 billion in total. At one point in 2021, the value of all cryptos reached $2.9 trillion.
Although there are thousands of cryptocurrencies today, not all are cut from the same cloth. I won’t spare words, some of them are completely meaningless. If there’s one thing past bear markets have taught us, it’s that just because a cryptocurrency exists today doesn’t mean it will be here when the next bull market returns.
Investors should prioritize cryptocurrencies that provide real value and utility because they will remain resilient no matter how brutal this bear market gets. So which cryptocurrencies today have what it takes to reach those greener pastures? I believe there are three.
Native cryptocurrency is here to stay
The one who started it all doesn’t seem to be going anywhere anytime soon. Although Bitcoin is down more than 75% from its all-time high, it remains the most valuable cryptocurrency by market cap, and that doesn’t seem likely to change in the future. Bitcoin may benefit from its first-mover advantage, but even in its infancy, cryptocurrency has risen into a class of its own.
There are few other cryptocurrencies that are getting the attention of companies like Bitcoin. Just the likes of the last few years BlackRock (the world’s largest asset management company), Fidelity, Teslaand: Exxonall have announced new business process integrations with Bitcoin in one way or another.
There are no other cryptocurrencies that have earned the title of official currency of a country. Two now recognize Bitcoin as an official form of currency: El Salvador and the Central African Republic. Additionally, countries such as Bulgaria and Ukraine are believed to hold billions of dollars in cryptocurrency.
With such interest from the public and private sectors, Bitcoin may be the safest bet for the next bull market.
The king of def
The next cryptocurrency most likely to survive this bear market is Ethereum: (ETH). It is the second most valuable cryptocurrency and serves a completely different purpose than Bitcoin.
Created in 2014, Ethereum brought a new innovation called smart contracts. These are automatically executed lines of code and do not require any person or intermediary to enforce the terms of the contract.
Thanks to Ethereum and its smart contracts, a whole new sector of cryptocurrency has been created. Known as decentralized finance or DeFi, this new field aims to replace traditional financial companies such as banks, lenders, etc. through the use of smart contracts.
Although there are other smart contract blockchains, Ethereum is the clear leader. Using a value called total value locked (TVL), we can compare the utility that blockchains support in dollar terms. You can think of TVL as comparing the market capitalization of companies.
Ethereum’s TVL is around $23 billion and accounts for over 59% of all DeFi value. It’s the next closest Tron, at just $4 billion TVL. Obviously, it’s not even close, and as DeFi evolves, Ethereum should continue to capture a large portion of the market.
The newcomer stands out
The latest cryptocurrency to make the cut Polygon (NOTE: -0.15%). Although it’s the youngest on this list, it packs a punch.
Polygon is known as a layer 2 blockchain because it makes layer 1 blockchains like Ethereum faster. It does this by processing transactions on its own blockchain and then adding them in packets to Layer 1 later.
While Ethereum dominates DeFi, it sometimes struggles with slow transaction speeds and high fees. To mitigate this, more users are moving to Polygon as it lowers the fees and increases speeds that have plagued Ethereum, while still offering Ethereum’s decentralization and security benefits.
This combination of bonuses has attracted considerable interest from some big names this year. Companies such as Nike:, Meta:, JPMorgan:, Disney, Coca Colaand: Starbucks all have partnered with Polygon in one way or another as they seek cost-effective solutions to produce crypto-related products.
Many of these efforts are in their infancy. However, if Polygon proves to be a viable way to accomplish these companies’ goals, it wouldn’t be hard to imagine a future where Polygon becomes the standard for businesses looking to move to blockchain.
JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, former CMO and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. RJ Fulton has positions in Bitcoin, Ethereum and Polygon. The Motley Fool has positions in and recommends Bitcoin, Ethereum, JPMorgan Chase, Meta Platforms, Nike, Polygon, Starbucks, Tesla and Walt Disney. The Motley Fool recommends the following options: Long January 2024 $145 calls on Walt Disney Long January 2024 $47.50 calls on Coca-Cola Long January 2025 $47.50 calls on Nike Short January 2023 $92.50 $4225s $1 calls and short $5 calls at $1. Walt Disney. The Motley Fool has a disclosure policy.