These six massively sold-0ff cryptos are worth buying now before they rebound. I picked three stable large-cap cryptocurrencies to add a bit of stability to the portfolio. The term “stability” is a relative term to cryptos and the crypto world, given its historical volatility.
In addition, I picked three alt-coin cryptos that could end up making significantly more. Keep in mind that so far, many cryptos have declined well over 50% since their peak prices last fall.
However, together as a portfolio, this set of cryptos should perform reasonably well over the coming year. That assumes that a severe recession does not hit. It also assumes the Federal Reserve (Fed) does not go on a money-draining cutback in monetary liquidity for more than three months or so.
Let’s dive in and look at these 6 cryptos:
Cryptos to Buy: Ethereum (ETH-USD)
- Market Cap: $146.8 billion
Ethereum (ETH-USD) is the second-largest crypto and is off over 68% year-to-date (YTD) and over 30.7% in the last 30 days. It is likely to rebound as the time approaches for its transition to a new validation system. These figures are compiled by Coinmarketcap.com, as well as by Coinpaprika.com.
It plans on moving from validating transactions on its platform using proof of work (i.e., crypto mining) to using a proof of stake system (non-mining).
However, Ethereum has recently been hit hard by institutions withdrawing from various decentralized finance (Defi) apps and platforms. CoinTelegraph reports that funds have sold off Ethereum for the past 11 straight weeks, totaling $459 million. The article suggests that the massive institutional interest in Defi products has been waning.
That accounts for the massive sell-off in Ethereum so far this year. But Ethereum smart contracts are used in more than just Defi applications. There are payment, real estate, decentralized certifications, trustless authentication, and numerous other Ethereum use cases, according to a recent Reddit discussion.
Once the Fed stops tightening the money supply, institutional interest will continue with Ethereum. That will eventually push it higher to rebound from recent lows.
- Market Cap: $402 billion
Bitcoin (BTC-USD), the largest cryptocurrency, is down over 55.8% so far this year and down 26.9% in the last 30 days, according to Coinmarketcap.com. Moreover, Coinpaprika points out that its one-year performance is negative 39.3% as of Jun. 24.
Bitcoin has a more stable history than Ethereum. Historically, Bitcoin investors tend to have lower buy-in costs than Ethereum holders. Often, investors do not want to take their long-term capital gains when the crypto is near a trough point. That implies that many Bitcoin holders are waiting for the crypto to rebound.
Another factor is that Bitcoin’s price has not fallen below $20,000, at least for very long. That seems to be a new red-line level for Bitcoin. Investors figure that if it sustains a move below $20,000, economic conditions must be deteriorating quickly.
That is why Bitcoin is likely to rebound from here. The market believes that the Fed, although tightening the money supply, is starting on a path that will both slow the economy and inflationary expectations.
That eventually will bring institutional interest back to Bitcoin. Unless there are unexpected developments in the economy, investors can expect BTC tokens to rebound as long as it stays over $20,000.
Cryptos to Buy: Solana (SOL-USD)
- Market Cap: $13.5 billion
Solana (SOL-USD) is the ninth-largest crypto and is down 77.9% YTD as of Jun. 24 at $39.29. However, Solana is off just 5% in the last 30 days and Coinpaprika says it is up over 23% in the last year.
That actually makes it a very good candidate to rebound significantly over the next year. For example, if Solana were to make up its 77.9% decline, it implies a gain of 353% (i.e., 1/(1-0.779)-1 = 3.525). In fact, even if Solana makes up for just 50% of its decline, it will double from here to $80 per SOL token.
Solana still claims to have faster and cheaper validation performance than Ethereum. But in the last several months, Solana has had difficulties with platform shutdowns every month or two. That also may be a major cause of the drop in Ethereum.
In the past year, Solana has made huge inroads in the non-fungible token (NFT) marketplace. But now that arena is having significant troubles. Many investors are selling their NFTs and cannot see their inherent value returning. This is hurting Solana’s valuation. Solana is finding new applications, like a smartphone app.
Assuming the recession is not as severe as the market fears, Solana stands a good chance of a rebound. This is because investors will return to more risky asset classes like cryptos, NFTs, and volatile blockchain platform assets like Solana.
- Market Cap: $9.8 billion
Dogecoin (DOGE-USD), the 11th-largest crypto at 7.4 cents as of Jun. 26, is down over 57% YTD and off 9.52% in the last 30 days. However, in the past year, the crypto is off by 71.2%, according to Coinpaprika.com.
Just like Solana, if the crypto were to retrace just 50%, it implies a double in the price of Dogecoin to 15 cents. That would still be well off its prior highs at over 33 cents per DOGE token.
This is a highly speculative token, especially since it is seen as a meme token and started as a joke among programmers. If it were not for the sponsorship of people like Elon Musk and Mark Cuban, it would not even be taken seriously so far.
For example, Elon Musk affirmed his support of the Doge crypto in a recent interview with Yahoo! Finance. These benefactors feel that Dogecoin can eventually have a future as a significant decentralized payment platform.
If that happens, then Dogecoin has a chance of making a significant comeback. However, investors should be clear that this is essentially a highly volatile and speculative investment.
Cryptos to Buy: Shiba Inu (SHIB-USD)
- Market Cap: $6.2 billion
Shiba Inu (SHIB-USD) is the 13th-largest crypto and another dog meme crypto. It has taken a 67% hit so far this year, but is up 6% in the last 30 days. However, it is actually up 44% in the last year, according to Coinpaprika.com.
This is a take-off of Dogecoin. Shiba Inu is not as well known and has been just as volatile. No one should expect that Shiba Inu will rebound any time before Dogecoin and other major cryptos rebound.
The fact is the same type of speculative investor that will invest in Dogecoin is the same type of investor that will buy Shiba Inu. That means this is one of the more speculative alt-coin cryptos. Investors should not expect it will rebound until investors have a more benign outlook on Fed tightening, a recession, inflation, and the stock market in general.
- Market Cap: $4.6 billion
Polygon (MATIC-USD) is the 18th-largest crypto at $4.6 billion and is only down 1.9% in the last 30 days. However, it is off 49% in the past year, according to Coinpaprika.com.
Polygon is known as a Layer 2 protocol crypto built on top of Ethereum. According to Coindesk, it “allows developers to create and deploy their own blockchains that are compatible with the Ethereum blockchain with a single click.”
As of Jun. 24, it is down 77.6% YTD to 57.7 cents from $2.5748 at the end of last year. Even if it retraces half of that decline to $1.875, MATIC crypto will make a 225% return.
On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.