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This past year in crypto is one that will likely go down in infamy. From the collapse of the Terra stablecoin in May that sent shockwaves through the crypto economy to the more recent implosion of the popular crypto exchange FTX, headlines in 2022 have been chock full of bankruptcies, shocking price declines, and scandals. Of course, the hope among token holders is that this crypto winter will thaw soon, but even if it lasts longer, these three Motley Fool contributors are optimistic that Bitcoin (BTC 1.14%), Ethereum (ETH 2.73%), and Fantom (FTM 3.51%) will survive.
Neil Patel (Bitcoin): When trying to identify cryptocurrencies that can make it through the current market downturn and shine bright on the other side, investors should focus on longevity first and foremost. I’ll get no points for originality with this recommendation, but based on this perspective, Bitcoin — the world’s most valuable cryptocurrency — immediately comes to mind as a digital asset that will easily outlast the current crypto winter.
Launched in January 2009, Bitcoin is the oldest and most developed cryptocurrency. It has already endured multiple crypto winters over the past 13 or so years, only to subsequently reach new highs. And this gives me much confidence that it will still be around once the current market turns around. What’s more, a plethora of financial instruments and infrastructure systems have already been built to support the Bitcoin ecosystem, and these developments are here to stay. As of this writing, Bitcoin’s market cap of $330 billion is more than double that of the next biggest crypto, Ethereum, a dominating lead I don’t think will change anytime soon.
While other younger and more speculative cryptocurrencies that have skyrocketed fast only to come crashing back down even faster certainly have caught investors’ attention in recent years, Bitcoin’s “boring” status in the world of digital assets gives it a measure of stability in an otherwise wild and unproven asset class. And I firmly believe that this characteristic has value, especially today when investors have lost confidence in the entire industry.
Since Bitcoin’s price hit an all-time high of just under $69,000 in November 2021, it has fallen by 75%. After a drop of that magnitude, allocating a small percentage (no more than 5%) of a well-diversified portfolio to Bitcoin might be a smart move for investors who have a truly long-term mindset and believe in its potential.
RJ Fulton (Ethereum): Although Bitcoin laid the foundation for the wave of cryptocurrencies that followed, the arrival of Ethereum in 2014 arguably changed crypto just as much as Bitcoin — and possibly more. Bitcoin and Ethereum differ in one primary way: smart contracts. The Ethereum blockchain is programmable, allowing developers to construct code that is executed when certain conditions are met. These smart contracts are the backbone of decentralized applications that have the potential to revolutionize finance, insurance, real estate, gaming, business, and even the internet itself.
While newer smart-contract-capable blockchains such as Cardano, Solana, and Avalanche have come along as would-be Ethereum competitors, they have been unable to usurp the leadership position of the original smart-contract blockchain.
When comparing Ethereum’s ecosystem to those of its competitors, it becomes abundantly clear that the blockchain is head and shoulders above the competition. Consider the total value locked (TVL) metric, which measures the value locked in the smart contracts on a given blockchain. Ethereum’s TVL is $24.3 billion, representing 58% of the value among all other smart-contract-capable blockchains. The blockchain with the second-highest TVL is Binance Coin, with a measly $5.5 billion.
The bulk of Ethereum’s value is tied up in smart contracts that are used for a broad array of use cases that comprise a new sector known as decentralized finance (DeFi) that includes applications supporting such things as yield farming, arbitrage, lending, and staking.
Ethereum surely benefits from its first-mover advantage, but the blockchain is still growing and innovating. Thanks to recent developments like The Merge and its future goals of supporting more applications, investors can be confident that Ethereum has what it takes to make it through this crypto winter.
Michael Byrne (Fantom): While Bitcoin and Ethereum are blue-chip cryptos with the largest market caps and most users, and thus likely to survive over the long term, allow me to point out a smaller crypto that could surprise people and join them on the other side of this crypto winter: Fantom (FTM 3.51%). Fantom operates on a Layer-1 blockchain that enables smart contracts, just like Ethereum. And like many altcoins, it is down by about 90% year to date, although it has climbed 16% from its 52-week low.
Fantom has a solid community behind it, with nearly 24 million unique wallet addresses. While activity on its blockchain is down since its peak, people are still using it to the tune of over 500,000 transactions per day, so Fantom isn’t going away any time soon. Andre Cronje, who was one of the key architects of Fantom (and who sent shock waves through the crypto community when he left the Fantom Foundation earlier this year, only to make a surprise return), points out that it is the oldest non-forked crypto other than Ethereum that has significant total value locked. Cronje also noted that, unlike other cryptos, Fantom has refused to pay for partnerships or exchange listings. As a crypto investor, I appreciate the Fantom Foundation’s long-term perspective.
Unlike many of the companies behind other cryptocurrencies, the Fantom Foundation reportedly has a lot of capital to get it through the crypto winter and beyond. In a recent article, Cronje wrote that Fantom holds 450,000,000 FTM tokens, $100 million in stablecoins, $100 million in other crypto assets, and $50 million in non-crypto assets. He writes that the company’s operating expenses are about $7 million a year, giving Fantom a 30-year runway at its current burn rate without touching its FTM holdings.
Cronje takes a long-term perspective, writing that “We have been operating for four years, we plan to continue operating for another 30 or more.” He says that Fantom earns about $10 million a year from transaction fees and other revenue sources, meaning that the company is cash-flow positive, which certainly stands out in the current environment. This gives it a cushion that should allow it to last until the next bull market in crypto. It could also theoretically use some of its capital to attract new products to its ecosystem and to lure more developers to build on its blockchain at a time when funding may be drying up at other cryptocurrencies.
Bitcoin and Ethereum will survive the crypto winter and thrive in the future, but if you are a risk-tolerant crypto investor looking for a name that’s a bit out of left field and higher on the risk spectrum, Fantom would be a good bet to be one of the survivors of the crypto winter because of its long-term perspective, solid community and user base, strong performance, and large war chest.
Michael Byrne has positions in Bitcoin, Ethereum, and Solana. Neil Patel has positions in Bitcoin. RJ Fulton has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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