Cryptocurrencies are in a bear market and have been for the last two months. Bitcoin has plummeted to around $32k, from a high of $64k. Since altcoins tend to follow Bitcoin, most of them have plummeted as well.
The worst part is that there is a risk of the market going down even further. The factors that led to the market correction are still prevalent. For instance, China’s crackdown on crypto mining was the trigger, and it is still a dominant market mover now.
Just today, the market has shed off 3.34%. This has come after the news that China is cracking down on miners in Anhui province. Considering that China has been cracking down on crypto mining for over two months, this shouldn’t really hurt the market, but it does. It goes to show that the bearish sentiment prevalent in the market is still strong.
Essentially, there is room for some more downside considering other factors at play, such as the regulatory concerns around Binance.
However, this does not mean that the market will not bottom out eventually. The market will rebound but not evenly. Some cryptocurrencies could remain depressed for much longer. It’s just like the S&P 500, where some stocks bottom out earlier than others in bear markets.
If previous crypto bear markets are anything to go by, then “Best of Breed” cryptocurrencies will bottom out ahead of the rest. These cryptocurrencies are likely to rally for a while before the rest of the market catches up.
Unfortunately, these top creme cryptocurrencies usually bottom out so fast that investors do not have the opportunity to catch them at the bottom. That’s why now that the entire market is quite depressed, it makes sense to start scouting for them right away.
To capitalize on this opportunity, one needs to have a very contrarian approach to the market. The opportunity is right when the market is at rock bottom, and most of the news flying around is heavily bearish.
If you look at history, especially in equities, market selloffs are when successful investors get into the market. They dare to buy when everyone else thinks the world is coming to an end.
If you have ever heard of Warren Buffet’s quote, “Be fearful when others are greedy, and greedy when others are fearful,” well, now is a perfect time to apply it to the crypto market.
Buying Forever Cryptocurrencies In The Worst Of Times
Looking at the crypto market holistically, this is a perfect time to buy cryptocurrencies that you intend to hold for the long haul. You have the discretion to choose the number of cryptocurrencies you plan to have in this category. For instance, you can code-name them elite 10, best five among other names. The bottom line is that these are top creme cryptocurrencies that are likely to stand the test of time.
Think of them as cryptocurrencies you can buy and comfortably forget for the next ten to fifteen years. Ideally, these cryptocurrencies should make up between 25% and 35% of your crypto holding.
However, it is important to note that it doesn’t mean that they will never depreciate just because they are top creme cryptocurrencies.
Crypto bear runs can be brutal, and just the slightest negative news can sink the market by double digits. The current bear run is a good example.
It started after Elon Musk took to twitter, and expressed environmental concerns over Bitcoin. This was enough to sink the market by over 20%. When the real negative news from China came, they added to an already bad situation.
Such will always be there. However, when you consider the fact that elite cryptocurrencies are likely to recover fast, it makes having these long-haul cryptocurrencies in your crypto portfolio worthwhile.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
All the above is easier said than done, though. There are two challenges to buying forever cryptocurrencies, and many people may find it hard to overcome them.
The first one is emotions. Investing involves money, and the fear of losing it creates all kinds of negative emotions. It can be pretty challenging to start buying when the news and the charts are all screaming sell.
The second challenge involves selecting the cryptocurrencies that actually qualify as forever cryptocurrencies.
It takes time and an individual’s personality to handle the emotions of investing in bear markets.
However, choosing forever cryptocurrencies is much easier to decipher. While there is no holy-grail to choosing forever cryptocurrencies, analysis shows that they share the following characteristics:
1. Competitive advantage
The crypto market is pretty crowded at this point, and it’s easy to find multiple projects all having the same selling point. In such a scenario, the most dominant in that space is the one that qualifies as a forever stock.
2. Funding
The ability for a cryptocurrency to continuously fund its operations is critical. This incentivizes developers to keep the network functional, which in turn draws in users. When considering funding, one should check whether the funding mechanism can be sustained perpetually without compromising decentralization.
3. Decentralization
At the core of blockchain technology is decentralization. In essence, the ability for a project to achieve its goals while at the same time remaining decentralized is critical. Highly centralized projects usually face the risk of going down if the single most powerful entity behind them goes rogue, or fails.
4. The quality of its developers
Cryptocurrencies are basically mathematics and programming all rolled up into one. Projects that have or can attract the best brains in mathematics and related fields stand to succeed long-term.
We will focus more on competitive advantage, as it pretty much overshadows everything else.
Like a company, competitive advantage in crypto simply means that crypto has a bigger network, and is more widely adopted than its closest competitors. This is what creates a mout around specific crypto.
5. Some big winners when it a competitive advantage
Bitcoin easily stands out on this front. It is the number one crypto and the most adopted so far. This gives it a huge advantage over all other cryptocurrencies. It does not carry over 50% of the total crypto market capitalization without a reason.
Ethereum is another good crypto that stands out on this front. While there are many platform blockchains in the market today, most of the Dapps in the market today are built on Ethereum.
Ethereum is also in the process of resolving its scalability issues, which will make many of its competitors irrelevant. That’s because many of them are built around Ethereum’s scalability challenges yet have minimal adoption. This makes it a top platform blockchain with good prospects long term.
Next, you will learn more about funding and how to apply it in building a portfolio of forever cryptocurrencies.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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