After the market sell off, buy these 2 cryptocurrencies now

After every sell-off in the crypto market, a popular strategy has been to “buy the dip”. As prices fall, many cryptocurrencies suddenly look undervalued and therefore much more attractive to long-term investors.

But there’s just one problem: this strategy doesn’t work with every cryptocurrency. The key is to find cryptocurrencies with long-term staying power and a proven track record of bouncing back from adversity. With that in mind, the two cryptocurrencies at the top of my list are Bitcoin (BTC -2.22%) and Ethereum (ETH -3.00%).

1. Bitcoin

The priority investment is Bitcoin, as this cryptocurrency has shown the greatest potential to bounce back from a selloff. Time and time again, Bitcoin has crashed in value, only to come back bigger and better than before.

Image source: Getty Images.

In 2023, Cathie Wood of Ark Invest looked at Bitcoin’s historical record to see if there was any validity to the “buy the dip” strategy for Bitcoin. Her findings certainly did not disappoint. She found that there were five times in Bitcoin’s history when its price crashed by 77% or more. Each time, Bitcoin bounced back to hit new highs.

Take the most recent decline, which occurred after Bitcoin hit a (then) all-time high of $69,000 in November 2021. Bitcoin went on to collapse in value by 77%, and many forecasters said it was the end of cryptocurrency. But guess what? Bitcoin rose rapidly in 2023, gaining over 150% in value. Bitcoin continued to gain in early 2024, reaching a new all-time high of $73,750.

Given this historical context, the recent sell-off in August, in which Bitcoin lost 28% of its value almost overnight, is far from disastrous. And as expected, in August many long-time Bitcoin investors did what they always do: they bought the dip. As a result, Bitcoin has now stabilized around $60,000.

2. Ethereum

Similar to Bitcoin, Ethereum also has a long history of bouncing back from adversity. If you look at a long-term Ethereum price chart dating back to its launch in 2015, you’ll see a surprising number of steep peaks and valleys. For example, in 2018, Ethereum dropped from $1,400 to $400 in just a few months. And in 2021, the value of Ethereum crashed by almost 50% before reaching a new all-time high by the end of the year.

The key to Ethereum’s resilience has been its diversified blockchain ecosystem. Ethereum is more than just a digital currency used to trade goods and services. It’s also a blockchain network that developers can build on to create anything from apps to tokens to decentralized markets. As a result, Ethereum has an established presence in almost every sector of the blockchain world. This helps diversify risk in the event of a market selloff.

That said, Bitcoin is a clear priority over Ethereum if you want to buy a discount. First, Bitcoin’s recovery period is usually much faster than Ethereum’s. And as mentioned above, Bitcoin tends to hit a new all-time high after a major selloff. This is not necessarily the case with Ethereum, which is still looking to bounce back from its all-time high of $4,891 in 2021.

What is the past is prologue?

The only caveat here is that past performance is no guarantee of future performance. In other words, there’s no iron law of finance that says an asset — especially not a digital asset — must go back in price after a market sale. Bitcoin and Ethereum’s ability to bounce back so many times over the past decade could just be a coincidence. Maybe it’s just a weird statistical anomaly, like the stock market January Effect.

But I don’t think so. What’s different this time around are the new spot ETFs for Bitcoin and Ethereum. These will help provide a floor for the prices of these two cryptocurrencies and help alleviate any bearish selling pressure. As long as investor flows into the new Bitcoin and Ethereum spot ETFs show signs of recovery, this could very likely be another opportunity to buy the dip in Bitcoin and Ethereum.