11 August 2022 • 9 min read
Every bear market poses a conundrum for almost every crypto investor. And the conundrum only becomes even more difficult during an especially uncertain period such as a crypto winter.
You may even be wondering whether the crypto in your portfolio will survive the latest crypto market “dip” (let’s not use the word “crash”). Should you continue to HODL? Or should you cut your losses and sell? With alarmist headlines such as “Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic,” you need nerves of steel to stay the course.
While many tout HODLing as a viable, long-term trading strategy, it is only effective and profitable if you’re holding a bag of promising coins. Therein lies the rub, though. How do you know if your stack of XYZ will emerge unscathed? Questions like these have become even more pressing in light of Terra’s crash.
Given crypto’s volatility along with the unpredictability of geopolitical developments, traders need to gather as much information as possible in order to “future-proof” their portfolios. And the way to do this is by arming yourself with a wide range of information related to every investment that you make.
Whether you love him or loathe him, Warren Buffet made a valid point when he suggested that an investor should never invest in something that they don’t understand. As crypto traders, we all need to understand the fundamentals: the concept, technology, utility, team, roadmap, and tokenomics, among other things, of any given coin.
Let’s start with some basics.
There are certain vital pieces of information that an investor can use to try to forecast the stability and profitability of a given cryptocurrency. Within the cryptosphere, promising cryptocurrencies often share a number of common features, which include security, decentralization, scalability, the ability to solve problems, usability, demand, and a limited supply. It’s also important to read a project’s whitepaper, which is where a great deal of this info should be addressed in detail, even if the project is a newer one.
And then there are coins that don’t quite align with these features, but nevertheless retain their value and appeal to investors, even during difficult times (we’re looking at you, Dogecoin). As Coindesk reported in April 2022, Dogecoin whale transactions reached an almost four-month high despite a bear market. Does this mean that DOGE is a “good” crypto project? It depends. However, is it a good project for most crypto investors? When put this way, the answer is obvious.
In addition to the above-mentioned features, there are other things to bear in mind when evaluating the relative strength and resilience of a specific crypto, such as the team behind the project, the coin’s market value, and its tokenomics. Let’s take a brief look at some of them below.
A project’s values involve its philosophy and value propositions. Good projects focus on proffering blockchain solutions to financial problems. Most projects often see themselves as extensions of Satoshi Nakomoto’s grand solution: Bitcoin.
Satoshi created Bitcoin as a disruptive, decentralized solution to the problems of traditional finance. He wanted a trustless financial system that eliminated the need for third parties, especially banks, and his vision has informed subsequent thinking about the future of cryptocurrency.
Like Satoshi, the creators or teams behind several reputable cryptocurrencies are visionaries looking to fill a lacuna in the global financial system through blockchain technology. Some of these creators/teams and their blockchain solutions include:
Vitalik Buterin: He created Ethereum (ETH) to deploy smart contracts and decentralized applications (dApps), and ETH has become a foundation of decentralized finance (DeFi). A smart contract is a traceable and immutable electronic agreement between two parties that self-executes when the agreement’s requirements have been fulfilled.
Changpeng Zhao: He founded Binance, the biggest cryptocurrency exchange in the world. Changpeng Zhao and his team not only built a crypto exchange, but they also created their own blockchain called the Binance Smart Chain (BSC). Since its inception, Binance Smart Chain has hosted a plethora of other crypto projects, such as PancakeSwap (CAKE) and BakerySwap (BAKE).
Anatoly Yakovenko: He created Solana to solve the blockchain trilemma of decentralization, scalability, and security. The Solana network processes transactions faster than Ethereum. To put this in context, Ethereum handles 15 transactions per second (TPS), while Solana processes up to 50,000 TPS.
What these projects and others like them have in common is utility. The value a project adds to the crypto ecosystem and overall financial system indicates its utility. Financial creations such as Ethereum, Binance, and Solana play vital roles in the crypto ecosystem. And as long as they play this role, their tokens—ETH, BNB, SOL—will continue to grow in value and remain profitable investments.
In contrast, projects that do not contribute to the ecosystem are not profitable in the long run. This is the case with most meme coins, which are generally based on internet memes and hype, and are therefore susceptible to rug pulls and may even attract crypto scams and crypto malware. Typical examples of meme coins include the Squid Game token and Will Smith Inu.
What distinguishes reputable projects from quicksands is technology. Viable crypto projects can offer value to the financial market because of their technology.
If the underlying technology of a crypto product is innovative and fills a gap, then there is a tendency for it to be sustainable and profitable. The entire crypto ecosystem is powered by blockchain technology, with different types of blockchains and distributed ledgers offering different benefits and drawbacks. For instance, Ethereum’s blockchain is built for smart contracts and decentralized applications, and uses a Proof-of-Stake (PoS) consensus mechanism. Similarly, Solana is a public blockchain for creating smart contracts. However, it uses a different consensus mechanism called the Proof-of-History (PoH), which makes it faster and more scalable than Ethereum. And then there are projects such as Hedera, which is a fully open source, proof-of-stake, public network and governing body for building and deploying decentralized applications (its native coin is HBAR).
Reputable crypto projects might also aim to gain revenue from the value they offer. Centralized crypto projects can earn by charging transaction fees. For decentralized projects, it’s a different matter, as there are only miners and validators participating in the network. These parties make money through mining, staking, and any other activity through which they earn crypto rewards.
Excluding decentralized coins, viable crypto projects always strive to create sustainable economic models to ensure their longevity. This is the reason Axie Infinity, the foremost play-to-earn game, had to modify its play-to-earn model following a crash in the value of its tokens (SLP and AXS) and NFTs. As we can see, projects like Axie Infinity follow a roadmap, and if their economic model causes them to deviate from the path of sustainability, then they do not hesitate to make modifications accordingly..
A roadmap outlines a project’s long and short-term goals with their timelines, giving investors insights into the project’s viability. Although a roadmap can indicate a project’s commitment to continuously add value to the system, it is obviously not a foolproof way to ensure a project’s viability. There are plenty of projects that have failed despite having a sound roadmap.
For example, Will Smith Inu’s roadmap had vague milestones, appearing more like a parody of a cryptocurrency than a proper one. At the other end of the spectrum is Ethereum, which features a clear roadmap in which major features and developments are outlined, such as Ethereum 2.0, which will improve Ethereum’s efficiency, security, scalability, viability, and overall value.
A quality roadmap instills confidence in investors, assuring them that the cryptocurrency has robust technology alongside expansive utility that is capable of sustaining it during a market crash.
A cryptocurrency’s market cap tracks its market value. It is obtained by multiplying the circulating supply of the cryptocurrency by its market price and gives more detailed information regarding a crypto asset’s value than the asset’s price alone. For example, if there are 200,000 units of crypto X with a market price of $3, and there are 50,000 units of crypto Y with a market price of $10, then crypto X is more valuable than crypto Y, even though the latter has a higher market price. Cryptocurrencies with large market cap are considered safer investments because they have high liquidity and are more resistant to volatility.
This is another important indicator of a cryptocurrency’s long-term profitability. It details key attributes of the cryptocurrency, including its total supply and distribution. In a nutshell, tokenomics indicate how the token would be mined, staked, burned, allocated, and vested. Viable projects build their ecosystem around their token, meaning that as long as there is a supply and demand for the token, there will be an increase in price (at best) or a sustained price level (at worse).
Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), and Solana (SOL) have all been mentioned thus far and for good reasons. These cryptocurrencies are among the top 20 cryptocurrencies, along with coins such as Cardano (ADA), Polkadot (DOT), Polygon (MATIC), and Tron (TRX), and tick all (or many of) the boxes in terms of value, sustainability, demand, and so on. They’re also safe bets for surviving the recent crash and even in the long term.
There are obviously many others—let’s take a look at a handful of them.
Aave is a DeFi protocol for lending and borrowing cryptocurrencies, providing an alternative way for people to participate in the crypto economy. Aave allows lenders to deposit crypto assets in liquidity pools, while borrowers, on the other hand, can use their crypto assets as collateral to obtain a loan through this liquidity. The effect is to create a constant cycle of supply and demand. Aave supports up to 20 cryptocurrencies, which are available to users for lending and borrowing.
The Aave platform continues to seek ways to add value and grow its ecosystem. In January, it announced plans to launch a mobile wallet for its users as part of a bigger plan to expand into Curve Finance liquidity pool and SushiSwap. With its eye on growth and expansion, AAVE is an asset to watch.
With the Web3 and NFT wave, metaverse/NFT projects such as Decentraland have gained traction. Decentraland is a virtual world where people can create and monetize their content, and users can interact with Decentraland in a variety of ways (e.g., virtual real estate and games). Parcels of land in Decentraland assume the form of an ERC-721 token called LAND. MANA, on the other hand, is an ERC-20 utility token used to acquire LAND as well as avatars and other items.
Increasing interest in the metaverse and the supply and demand created by buying and selling LAND makes MANA a highly profitable asset.
Like Solana, Avalanche is an Ethereum rival and aims to solve the blockchain trilemma. It has three interoperable blockchains: the Exchange Chain (X-Chain), the Contract Chain (C-Chain), and the Platform Chain (P-Chain). These blockchains make it a low-cost, scalable platform for building decentralized applications.
The AVAX token serves as a currency for transaction fees on the network, and, as a deflationary measure, transaction fees are burned to sustain the currency's value. Using AVAX as a transaction fee ensures that there is a consistent supply and demand for the token.
UniSwap is an automated market maker (AMM) and a decentralized exchange for trading DeFi tokens. It automates trading and solves the liquidity problems associated with the DeFi space.
UNI is the governance token of the platform, making it a democratic space where UNI holders can decide on the future of the platform. UniSwap is one of the first decentralized exchanges, and it has continued to evolve to offer more value and utility, all of which bodes well in terms of future sustainability and profits in the long run.
Stellar was created to solve one problem: the high fees associated with the Bitcoin and Ethereum blockchains. It is a simple, decentralized, and extremely fast payment protocol. Every transaction on Stellar costs 0.00001 XLM and is processed within 3 to 5 seconds. In 2019, IBM built its global payment system, World Wire, on the Stellar network to allow large financial institutions to submit and process transactions through Stellar. Such partnerships, coupled with Stellar’s uniqueness, make XLM a highly sustainable and profitable option to add to a crypto portfolio.
So, as we gaze into our crystal ball, which cryptocurrencies will survive a market crash? Well, aside from some of the more established coins, it’s anyone’s guess. But it’s an educated guess, and each trader should conduct their own due diligence and research in order to determine which cryptocurrencies are right for them.
Luckily, we’ve put together a range of informative articles to get you started, whether you’re looking for the best crypto podcasts, best books on crypto, the most undervalued crypto, best books on algorithmic trading, or even the best crypto films.
And if it’s all a little too serious at the moment, then have a laugh with some of the funniest crypto memes! They're sure to get you through even the worst market conditions.