The past year in crypto is one likely to go down in shame. From the collapse of stablecoin Terra in May, which sent shockwaves through the crypto economy, to the recent implosion of popular crypto exchange FTX, headlines in 2022 have been chock full of bankruptcies, shocking price declines and scandals. Of course, there is hope among token holders that this crypto winter will soon be thawing, but even if it lasts longer, these three Motley Fool contributors are optimistic that it will Bitcoin (BTC -0.28%), ether (ETH -1.45%)and phantom (FTM -1.37%) will survive.
The crypto winter veteran
Neil Patel (Bitcoins): When trying to identify cryptocurrencies that can make it through the current market downturn and shine brightly on the other side, investors should focus primarily on longevity. I won’t get any points for originality with this recommendation, but based on that perspective, Bitcoin – the the most valuable cryptocurrency in the world — comes immediately 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 set new highs. And that gives me a lot of confidence that it will still be there when the current market turns around. Additionally, a wealth of financial tools and infrastructure systems have already been built to support the Bitcoin ecosystem, and these developments will continue. As of this writing, Bitcoin’s $330 billion market cap is more than double that of the next largest crypto, ethera dominant leadership that I don’t think will change anytime soon.
While other younger and more speculative cryptocurrencies that have soared quickly only to plummet again more quickly have certainly caught the attention of investors in recent years, Bitcoin’s “boring” status in the digital asset world gives it one degree of stability in an otherwise wild world and unproven asset class. And I firmly believe that trait has value, especially now that investors have lost confidence in the industry as a whole.
Since hitting an all-time high of just under $69,000 in November 2021, the price of bitcoin has fallen by 75%. After a drop of this magnitude, allocating a small percentage (no more than 5%) of a well-diversified portfolio to Bitcoin could be a smart move for investors who have a truly long-term mindset and believe in its potential.
The smart contract king
RJ Fulton (Ethereum): Although bitcoin laid the foundation for the cryptocurrency wave that followed, the arrival of Ethereum in 2014 arguably changed crypto just as much as bitcoin—and possibly more. Bitcoin and Ethereum differ mainly in one point: smart contracts. The Ethereum blockchain is programmable, allowing developers to create code that runs 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 enabled blockchains such as Cardano, Solanaand avalanche when potential competitors of Ethereum emerged, they were 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 miles ahead of 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, which is 58% of the value of all other smart contract-enabled blockchains. The blockchain with the second highest TVL is Binance coinwith a mere 5.5 billion dollars.
Most of Ethereum’s value is tied up in smart contracts, which are used for a wide range of use cases that include a new sector called Decentralized Finance (DeFi), which includes applications that support things like yield farming, arbitrage, lending, and staking .
Ethereum certainly 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 to support more applications, investors can rest assured that Ethereum has what it takes to survive this crypto winter.
The newbie
Michael Byrne (Phantom): While Bitcoin and Ethereum are blue-chip cryptos with the largest market caps and most users, and are therefore likely to survive in the long term, allow me to point out a smaller crypto that might surprise people and join them on the other side of this crypto Winter: phantom (FTM -1.37%). Fantom operates on a layer 1 blockchain that enables smart contracts, just like Ethereum. And like many altcoins, it’s down about 90% year-to-date despite surging 16% from its 52-week low.
Fantom is backed by a solid community of almost 24 million unique wallet addresses. While activity on its blockchain has declined since its peak, people are still using it at over 500,000 transactions per day, so Fantom isn’t going away any time soon. Andre Cronje, one of Fantom’s key architects (and who sent shockwaves through the crypto community when he left the Fantom Foundation earlier this year, only to return in surprise), points out that this is the oldest non-fork crypto other than Ethereum that has a significant total value locked. Cronje also noted that unlike other cryptos, Fantom has refused to pay for partnerships or listings. As a crypto investor, I appreciate the Fantom Foundation’s long-term perspective.
Unlike many companies behind other cryptocurrencies, the Fantom Foundation reportedly has plenty of capital to see 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 approximately $7 million per year, giving Fantom a 30-year run at its current burn rate without touching its FTM inventories.
Taking a long-term perspective, Cronje writes: “We have been in operation for four years, we plan to continue operations for another 30 years or more.” He says that Fantom makes about $10 million a year from transaction fees and other revenue streams, meaning the company has positive cash flow, which certainly stands out in the current environment. This gives it a cushion that should allow it to hold until the next crypto bull market. It could also theoretically use some of its capital to attract new products into its ecosystem and attract more developers to build on its blockchain, while funding for other cryptocurrencies may dry up.
Bitcoin and Ethereum will survive the crypto winter and thrive in the future, but if you’re a risk-tolerant crypto investor looking for a name that’s slightly out of left field and higher on the risk spectrum, Fantom would be a good pick as one of the Crypto winter survivors due to its long term perspective, solid community and user base, strong performance and large war chest.
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