4 Cryptocurrencies to Buy Now

By | March 18, 2024

The approaching Bitcoin (CRYPTO: BTC) The April halving is one of the most anticipated events in the blockchain and crypto world, and for good reason. In the three previous halvings, Bitcoin’s price subsequently soared, and many investors expect the same to happen this time.

As a result, many investors are planning to buy Bitcoin before the halving. But which other cryptocurrencies will benefit from the halving? Here are four that could be ready to take off.

Cryptocurrencies are highly correlated with Bitcoin

While the prices of all cryptocurrencies are correlated to some extent with Bitcoin, a handful of top cryptocurrencies have historically shown higher-than-average correlations. In other words, if you follow the price of Bitcoin, and you follow the price of these cryptocurrencies, you will see that they tend to zigzag in harmony for the most part. So if Bitcoin is poised for a big breakout after the halving, shouldn’t you look for other cryptocurrencies that are likely to come along for the ride?

Generic cryptocurrency coin.

Image source: Getty Images.

With that in mind, it’s hard to ignore Ethereum (CRYPTO:ETH), which has been highly correlated with Bitcoin for much of its existence. This correlation increases to 0.95 (1 is a perfect correlation). However, after Ethereum fundamentally changed its blockchain architecture as part of The Merge in 2022, the correlation between Bitcoin and Ethereum began to decrease.

In a note to its institutional clients dated April 2023: Coinbase worldwide (NASDAQ: MINT) discussed the changing correlation, which had fallen from a 12-month average of 0.90 to a new level of 0.82. At the time, it seemed like the paths of the two cryptos were finally diverging.

However, according to cryptocurrency correlation matrices, it appears that the 12-month correlation has climbed back to 0.89. Intuitively, this makes sense, considering that both Bitcoin and Ethereum are up an identical 60% so far in 2024. While you might not get a near 1:1 correlation like in Ethereum’s early days, most investors would probably do well. be happy with getting 90% of Bitcoin’s returns.

Undervalued cryptocurrencies

For the sake of argument, I’m going to suggest that the title “undervalued cryptocurrency” only applies if a cryptocurrency is trading more than 50% below its all-time high. That standard could help identify those who have a lot more room in this crypto market rally.

For example, consider the difference between Solana (CRYPTO: SOL) And Avalanche (CRYPTO: AVAX). Both are popular Layer-1 smart contract blockchain platforms, so it is interesting to compare them head-to-head.

At around $187, Solana is 29% below its high of $260. In contrast, Avalanche is trading more than 60% below its high of $146. Lately, Avalanche has started to gain momentum among investors, and I think much of this stems from the realization that even at a price above $50, it could be remarkably undervalued.

Two other cryptocurrencies that rank in the top 20 by market capitalization also deserve further attention simply because they trade at such significant discounts to their highs: Cardano (CRYPTO:ADA)that 76% are trading below their peak, and Chain link (CRYPTO: LINK)which is trading 62% below its peak.

Rules and guidelines for choosing winners

There are no ironclad rules to pinpoint which cryptocurrencies will boom in 2024, but you can use certain guidelines to help narrow down the area of ​​potential purchases. One cryptocurrency that has historically been highly correlated with Bitcoin is Litecoin (CRYPTO: LTC)but it wasn’t on my list.

Likewise, I didn’t include any metaverse crypto tokens or meme coins on the list. While they may seem undervalued at their current prices compared to their historical highs, I believe there are much better investments out there.

If I were forced to choose just one of the four cryptos on my list – Ethereum, Avalanche, Cardano, and Chainlink – my top choice for maximum potential upside would be Avalanche. It is highly correlated with Bitcoin (a 12-month correlation of 0.79) and is now in the top 10 cryptocurrencies on Coinbase in terms of daily trading volume. In addition, the recent technical upgrade (“Durango”) has received positive reviews.

But keep in mind that crypto is a notoriously volatile asset class, and there is increased risk when investing in relatively unknown altcoins. So if you’re particularly risk-averse, you might want to focus on the one cryptocurrency best positioned to benefit from the upcoming halving, and that’s Bitcoin itself.

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Dominic Basulto has positions in Bitcoin, Cardano and Ethereum. The Motley Fool holds positions in and recommends Avalanche, Bitcoin, Cardano, Chainlink, Coinbase Global, Ethereum, and Solana. The Motley Fool has a disclosure policy.

A Bitcoin Halving is Coming: 4 Cryptocurrencies to Buy Now was originally published by The Motley Fool

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