After a stellar January and February, the crypto market has pulled back since the beginning of March. Even with the recent decline, the collective market cap of crypto is still up about 20% in 2023 and optimists are hopeful that the strong start to the year might signal an end to a brutal bear market that has gripped crypto since late 2021.
The exact timing of when this bear market will end is uncertain, but eventually this crypto winter will probably thaw just like those in the past. In preparation for a potential crypto spring, there are two cryptocurrencies to buy today.
What these two might lack in originality is made up for in their track records of innovation, history of weathering multiple bear markets, and the continuing ability to disrupt the status quo. For these reasons, and many others, Bitcoin (BTC 7.50%) and Ethereum (ETH 6.73%) are recognized as the top assets in their class.
The original cryptocurrency
For Bitcoin, one of the main reasons it is the most valuable cryptocurrency is simply because it was the first, dating to 2009. Although this head start has receded in significance in recent years as other cryptocurrencies have jockeyed for market share, Bitcoin has remained at the top due to its inherent characteristics, which make it an attractive long-term investment. In the past five years it has returned more than 140% and over the decade it has notched a 44,300% return.
To many, Bitcoin is viewed as an asset that preserves wealth. Ingrained into Bitcoin’s code is a feature that ensures it will become increasingly scarce, because only 21 million bitcoins will ever enter circulation. In addition, the rate of new coin creation is dwindling. Today, there are about 19.25 million coins in circulation, and the remaining 1.75 million will enter the supply gradually until 2140, when the last bitcoin is mined.
In addition to being completely decentralized and highly secure, Bitcoin does something that fiat currencies have failed to do — protect purchasing power. Unlike currencies such as the U.S. dollar, British pound, Japanese yen and many others, Bitcoin’s supply rate is growing extremely slowly. The central banks that control fiat currencies are able to inflate the supply in hopes of accomplishing a host of objectives. Whether the central banks achieve those objectives is a topic for another day, but what inevitably does happen through this process is a decrease in purchasing power. Bitcoin aims to resolve this by offering holders a way to increase their purchasing power with time as supply growth dwindles and demand increases.
A groundbreaking invention
Although Bitcoin is viewed by many as a store of value, Ethereum derives its value from its seemingly infinite number of use cases. When Ethereum came into existence in 2015 it completely changed the crypto economy. With the arrival of Ethereum, developers could now use computer code to cause specific actions to take place when particular criteria were met. Known as a smart contract, this code essentially turned Ethereum into programmable internet money that didn’t require any one person or entity to oversee transactions.
This innovation laid the foundation for an entirely new and lucrative sector — decentralized finance (DeFi). With these fancy new smart contracts, developers could optimize existing traditional financial processes, such as lending, because there’s no need for a bank. Terms — such as the loan’s value, interest rate, and duration — are all written into the smart contract. Outside of finance, smart contracts have the potential to even revolutionize industries such as real estate, supply chain management, and healthcare. As a result of this long term potential, Ethereum has treated investors to generous returns. Despite being newer than Bitcoin, Ethereum has actually outperformed the original cryptocurrency over the past five years and is up more than 180%.
All you need are these two
Although Bitcoin and Ethereum differ in the way they are used, both serve a unique purpose. As a result, they a make up a majority of the value of the cryptocurrency asset class — roughly 60%, with Bitcoin at 41% and Ethereum at 19%.
Because Bitcoin and Ethereum are so big, as they go, so goes the rest of the market. For this reason, they offer investors the simplest and most effective means to prepare for crypto’s recovery. Rather than trying to find an obscure, unproven cryptocurrency, keep it simple. Investing in Bitcoin and Ethereum has treated investors well in years past and likely will for years to come.
RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
