Since the arrival of 2023, the crypto market has seen a more than refreshing and much needed resurgence in prices. Year-to-date, the combined market capitalization of all cryptocurrencies has increased by more than 40% and has once again reached the $1 trillion mark.
But despite this rise, most cryptocurrencies are still well below their previous all-time highs.
With a sense of renewed hope and a sense that the worst may be over, here are two cryptocurrencies that I can’t stop buying — and that I think investors should prioritize if the bull market returns.
The undisputed champion
We cannot talk about cryptocurrency without mentioning the first and most valuable cryptocurrency in the world: Bitcoin (BTC -0.45%). Despite the thousands of cryptocurrencies that have been created since its launch in 2009, Bitcoin remains at the top of the asset class. As of today, it still accounts for more than 40% of the total value in the cryptocurrency, a sign that Bitcoin is still the cryptocurrency of choice for investors.
Because of this vast majority of value, the prices of many other cryptocurrencies are tied to Bitcoin. Typically, as Bitcoin goes, so goes the rest of the market.
Fortunately, there is reason to believe that Bitcoin may be ready for a new move and will likely lead to the return of the bull market. When evaluating the price of Bitcoin in the past, there seems to be a unique phenomenon that occurs when the next Bitcoin halving is about a year and a half away.
Halvings are a mechanism built into Bitcoin’s code that reduces the rate at which new coins enter circulation. About every four years or 210,000 blocks added to the blockchain, the number of Bitcoins allocated to miners is cut in half. In the earliest days of Bitcoin, the reward was 50 Bitcoins, but this has shrunk to just 6.25 today, as it has undergone multiple halvings since then.
The next halving is scheduled for sometime in May 2024, which means that this very influential event is just under a year and a half away. Based on past data, Bitcoin price appears to have bottomed near this point in the halving cycle. From here, the downside risk is usually the lowest, while the potential for profit is the highest.
Whether Bitcoin will behave as it has in the past remains to be seen, as only time will tell. But we can project with a high degree of confidence that this cycle will play out just as it has in past years. If this is the case, Bitcoin is in unique territory it only happens once every four years and could be a great time for investors to buy, as the probability that the worst may be over is getting more accurate by the day.
The next best option
The second most valuable cryptocurrency in the world has had its fair share of success since its inception in 2015. Over the past eight years, Ethereum‘with (ETH -0.47%) The rise has paved the way for whole new lucrative and growing sectors of cryptocurrency like decentralized finance (DeFi).
Unlike Bitcoin, which is resistant to major changes, Ethereum has tons of developers working on fine-tuning the code and even implementing new features.
One of those new features came in the form of an upgrade known as London hard fork. This upgrade introduced a new mechanism that would “burn” or permanently remove ether from circulation, effectively turning Ethereum into a deflationary asset.
Before the London hard fork, Ethereum had an inflation rate of more than 3.5%. But since the implementation of the upgrade, the rate at which new ether enters circulation is actually negative. The number varies based on demand, but as of today, Ethereum boasts a deflation rate of -0.074%, meaning that the total supply of ether is shrinking.
It took some time to materialize due to the necessary implementation of The Merge (another Ethereum upgrade launched in September 2022), but with the added deflationary pressure, the price of Ethereum is likely to benefit as it is now truly subject to the dynamics of limited supply and increasing demand. If the bull market returns and demand for Ethereum increases, those looking to buy will likely drive up its price as the total supply of ether shrinks.
RJ Fulton has positions in Bitcoin and Ethereum. The Motley Fool has positions and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.