The recent pullback in the crypto market could be the perfect opportunity to buy the dip in undervalued cryptos. But which ones?
Two cryptos on my radar right now are Bitcoin (CRYPTO: BTC) and Solana (CRYPTO: SOL). Both started off the year with tremendous momentum, but are now trading a steep discount from where they were just a month ago. Let's take a closer look at the case for buying them now.
- Bitcoin
Investing in Bitcoin appeared to be an obvious choice at the start of January, with the cryptocurrency valued at around $45,000. Anticipation was high, especially with the imminent approval of new spot Bitcoin ETFs by the SEC, expected to trigger a significant surge in Bitcoin's price. However, the reality has not aligned with these expectations, as Bitcoin has now dipped below $40,000. Concerns are growing that the "buy the rumor, sell the news" trend could persist, contributing to further declines.
Despite these challenges, Bitcoin holds the potential for a substantial turnaround, primarily driven by the upcoming Bitcoin halving scheduled for April 2024. Previous halving events in 2012, 2016, and 2020 have consistently led to remarkable outcomes. The 2020 halving, for instance, propelled Bitcoin to an unprecedented peak of $69,000 per coin. Optimistic projections suggest that Bitcoin could reach or exceed $100,000 by the close of 2024, assuming the halving unfolds as anticipated.It's essential to approach these predictions with caution, acknowledging that historical performance doesn't guarantee future results. The bullish phase of each Bitcoin halving cycle typically spans 12 to 18 months, implying that any significant surge may not occur until 2025.
What distinguishes this Bitcoin halving from previous ones is the notable participation of prominent investors.
Their deep engagement in this event adds credibility, instilling confidence that the halving could indeed serve as a substantial catalyst for Bitcoin's value. Caution is advised, though, to avoid overestimating immediate outcomes and to recognize the cyclic nature of Bitcoin's performance.
2. Solana
Similar to Bitcoin, Solana appeared to be an obvious choice for crypto investors in 2024. At one point last year, Solana experienced an impressive surge of over 1,000%, reaching a high trading value of over $120 just a week before the new year. However, it's now surprising to see Solana's value hovering around $80.
Two primary factors contribute to this significant decline in Solana's value.
Firstly, the heightened excitement surrounding the introduction of new Bitcoin ETFs has diverted institutional funds away from Solana, limiting its potential for short-term growth. In January, Bitcoin dominated nearly 98% of all institutional investments in the crypto space.
Secondly, the narrative that positioned Solana as the next Ethereum (CRYPTO: ETH) has seemingly shifted. The prevailing sentiment now suggests that "Ethereum is the next Ethereum." This shift is fueled by anticipation surrounding an Ethereum blockchain upgrade designed to enhance speed, as well as the buzz surrounding a potential spot Ethereum ETF.According to this evolving narrative, once the SEC greenlights the new Ethereum ETF, substantial investor capital is expected to flow into Ethereum. However, it's worth noting that investors may be less enthusiastic about an Ethereum ETF compared to a Bitcoin ETF.
In summary, the current dip in Solana's value could present an opportune moment to buy, especially when attention is predominantly focused on Ethereum. Cathie Wood of Ark Invest recently expressed optimism on CNBC, advocating for Solana as a superior investment to Ethereum. The fundamental advantages, such as speed and cost efficiency, remain unchanged, and Solana appears to be innovating at a more rapid pace than Ethereum. Notably, Solana's mobile crypto strategy, highlighted by the Saga "crypto phone," and its blockchain payment initiatives through a partnership with Visa, indicate ongoing developments that contribute to its appeal in the crypto market.
Risk factors
It's important to point out that both Bitcoin and Solana -- like all cryptos -- are very volatile, risky assets. In terms of overall risk-reward profile, though, Bitcoin is likely a "safer" investment than Solana. It now has increasing approval from Wall Street (with a few notable exceptions, such as Jamie Dimon). And it has a much longer track record of delivering market-beating performance than Solana.
That being said, both cryptos are worthy of a closer look. Short-term factors appear to have pushed down their prices in January, but their long-term outlook remains relatively unchanged. I'm still bullish on Bitcoin as the future of digital money, and I see Solana as the first-ever smart contracts blockchain able to take on Ethereum on its digital home turf -- and win.