Bitcoin (CRYPTO: BTC), which is now up more than 65% for the year, remains one of the top-performing cryptos of 2023. However, there is no guarantee that it will continue to lead the crypto market higher, especially given Bitcoin’s recent pullback from the $30,000 level and all the economic uncertainty right now.
As a result, savvy crypto investors should be preparing for a variety of possible economic scenarios. That could mean expanding your investment focus beyond Bitcoin. Here’s a closer look at three cryptos that could soar higher than Bitcoin in the second half of 2023.
Ethereum
First up is Ethereum (CRYPTO: ETH), my favorite defensive crypto to hold if you think that economic weakness is going to be the main narrative for the second half of 2023. That’s because Ethereum boasts a remarkably well-diversified crypto ecosystem. While some cryptos are good at one specific thing, Ethereum is good at just about everything, from non-fungible tokens (NFTs) to decentralized finance (DeFi). By investing in Ethereum, you are diversifying away some of the risk of holding crypto in your portfolio. If one sector of the blockchain world is doing poorly, there is likely to be another sector that is performing well.
Of course, Ethereum offers potential upside as well. In large part, this is due to the technological upgrades that Ethereum continues to make. After The Merge in 2022, Ethereum followed up with another upgrade in 2023 related to crypto staking. Ethereum co-founder Vitalik Buterin has committed Ethereum to a detailed roadmap of future upgrades as well, ensuring that Ethereum can outcompete and outperform any of its blockchain rivals.
Solana
Solana (CRYPTO: SOL) is already up about 110% this year, and it continues to be an innovation powerhouse. The latest innovation from Solana is the Saga crypto phone, and it’s a potential game changer. Long story short, the Saga is an Android-powered mobile phone that makes everything you do with crypto easier. With the typical mobile phone, for example, interacting with a blockchain wallet can be very frustrating. The Saga, though, uses proprietary Seed Vault technology to simplify the process of using your phone as your crypto wallet.
Thus far, reviews of the Saga have been mostly positive. The $1,000 phone has been widely available to the public only since early May, so keep an eye on sales data as it rolls in. If sales numbers are bullish, then the new Solana mobile strategy could be the catalyst this crypto needs to outpace Bitcoin in coming months.
Stacks
Finally, there’s Stacks (CRYPTO: STX), a Layer-2 solution for Bitcoin. In other words, Stacks is a blockchain designed to sit on top of the main Bitcoin blockchain. Other than the Lightning Network, Stacks is arguably the most popular Layer-2 for Bitcoin. With a focus on smart contract functionality, Stacks is at the forefront of bringing enhanced performance to the Bitcoin blockchain.
Image source: Getty Images.
That might not sound sexy at first, but it is when you consider that this functionality includes NFTs. Over the past two months, there has been an explosion of popularity in NFTs and meme coins for Bitcoin. Everybody, it seems, now wants to buy Bitcoin NFTs and trade Bitcoin crypto tokens, and Stacks has been one of the biggest beneficiaries. As long as the market is buzzing about Bitcoin NFTs, Stacks has a legitimate shot at posting stratospheric returns.
Of course, Stacks is also much riskier than other cryptos simply because it is so highly leveraged to Bitcoin. When Bitcoin goes up, Stacks goes way up. Thus, while Bitcoin is up 62% year to date, Stacks is up more than 200%. But when Bitcoin goes down, Stacks gets absolutely hammered. Thus, over the past 30 days, Bitcoin is down nearly 10%, but Stacks is down almost 27%. So buyer beware. This is a crypto to buy only if you are highly confident that Bitcoin is going to continue to go up.
Which crypto has the best risk-reward profile?
From my perspective, Ethereum offers the best risk-reward profile of these three cryptos, primarily due to its superior diversification benefits. In 2023, it has largely kept pace with Bitcoin, and it’s easy to see that if Bitcoin stumbles, Ethereum could easily surpass it in terms of upside potential. As a result, I’m bullish on Ethereum as one crypto that could outperform Bitcoin in 2023.
Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.
