Financial markets are in a rough patch as the triple threat of inflation, rising interest rates and geopolitical uncertainty send investors racing for the exit. The cryptocurrency market, down 22% to $1.7 trillion year to date, is not immune to these challenges.
But the drop could be an opportunity to buy quality assets at a discount. Let’s explore why Bitcoin (BTC -3.73%) Y Aave (AAVE -5.24%) could fit the bill.
As the crypto that started it all when it launched in 2009, Bitcoin’s first-mover advantage has given it scale, widespread acceptance, and brand recognition. These features could help you maintain your value during this tough market and come back stronger than ever.
The jury is still out on whether Bitcoin is a safe haven asset, which is a type of investment that can reliably hold or even gain value during economic downturns. But unlike stocks, cryptocurrency is protected from recessions because it doesn’t rely on earnings to build value. And unlike bonds, real yields aren’t directly affected by inflation.
Bitcoin has lagged behind newer cryptocurrencies in technical capabilities such as transaction speed and support for decentralized applications (dApps), which offer services on the blockchain. But its strong brand allows it to dominate the industry. With a market value of almost $700 billion, Bitcoin accounts for more than 41% of the entire cryptocurrency market. And the crypto directory cryptwerk.com estimates that it is accepted by nearly 8,000 merchants. This is impressive compared to its closest rival. Etherealwhich is accepted at just over 4,000.
At around $36,000 per coin, Bitcoin is down around 47% from its all-time high reached in November of last year. This could be a good entry point for investors who believe in the long-term potential of the asset.
With a market capitalization of $1.9 billion, Aave is down 79% from its all-time high reached in May of last year. But the asset’s very cheap valuation and innovative fintech use case give it impressive long-term potential.
Aave fits into a class of cryptocurrencies known as decentralized finance (DeFi), which aims to replace traditional financial services like banks with blockchain-based equivalents to give investors more choice and control over their wealth. The platform allows users to borrow and lend cryptocurrencies with a unique twist.
Aave loans are 100% collateralized, which means that their primary purpose is to allow the borrower to “cash out” their cryptocurrency holdings without selling. This service could benefit investors who need liquidity but still want to benefit from the long-term appreciation of their assets. Aave’s appeal will naturally improve in a crypto bull market, making it a great way for investors to bet on a recovery in the industry.
Invest in a difficult market
Yes, the market is crashing. But we’ve been here before, and what usually happens next is a rebound. While no one knows how long it will take for the market to recover, Bitcoin and Aave could make big investments while trading at a discount to their all-time highs.