The chances are high that if you’ve been paying attention to Wall Street, you’ve noticed that stocks are getting pummeled. The first two years of the new decade brought their own woes along with them; the coronavirus pandemic brought new challenges to the market, which in turn sparked a massive surge in speculative investing and crypto trading as the Federal Reserve took to its aggressive spending campaign. 2022, then, is bringing its own brand of turmoil to the stock market, with the conflict in Eastern Europe setting a backdrop for broad market losses. With investors looking at a potential recession in the coming months, many are wondering where to put their money. And, as is now the norm thanks to the growing ubiquity of the cryptocurrency market, there’s always cryptos to buy as refuge.
InvestorPlace’s Luke Lango has an interesting take on the potential recession. He says that investors shouldn’t be so scared at the thought of a bearish downswing; the odds are low and losses wouldn’t likely be too steep. And yet, he is advising his readers to buy growth stocks. Indeed, Lango says that recessionary periods are ripe for growth investments, presenting their own low-stake opportunities to get into hot markets.
This way of investing is certainly not kind to the faint-of-heart. One needs to have a high tolerance for losses in order to stay in a growth investment for the long run. That tolerance is stretched thin in a bear market. But if you’re one of those investors looking for a buy that can win big in the face of economic turmoil, the crypto industry is another solid choice. Cryptocurrencies with high growth potential can be one of the best investments to make in the face of a possible recession. With that in mind, consider these cryptos to buy:
Cryptos to Buy Ahead of a Recession: Ethereum (ETH-USD)
When it comes to cryptocurrencies with high growth potential, there’s perhaps no better candidate in 2022 than Ethereum. The network is on the verge of its biggest upgrade to date; with the new, revamped Ethereum network set to roll out in the coming months, there’s no better buying opportunity than right now.
Ethereum is one of the strongest crypto buys by far. It precedes only Bitcoin by market capitalization, with a whopping $310 billion to its name. That’s because it’s undoubtedly the largest layer-1 decentralized app (dapp) platform in the world; the network hosts about 3,000 dapps. With such a huge share of the total dapp market on its platform, it’s highly unlikely that Ethereum will be going away any time soon.
This holds especially true when you consider the circumstances these dapps are enduring currently. See, gas prices on Ethereum are a constant point of contention for users. The network can process fewer than 100 transactions per second. With 3,000 dapps, one can see where that becomes an issue; there is a constant bottleneck of transactions on Ethereum. Fees to process transactions, then, can become absurdly high. This has spawned different solutions like that of layer-2 player Polygon (MATIC-USD).
The reason dapps remain on this platform, even in the midst of gas-fee woes, is because of the coming Merge upgrade. For months now, Ethereum has been laying the groundwork for its biggest upgrade ever. It will introduce proof-of-stake to the network to replace energy-consumptive proof-of-work. It will also introduce sharding, which allows the network to break down data into more manageable pieces. The upgrade will help the network up its transactions per second to as high as 100,000.
Cryptos to Buy Ahead of a Recession: Bitcoin (BTC-USD)
There are few circumstances in which Bitcoin isn’t considered a great crypto to buy and hold onto, and now is certainly not one of them. A potential recession opens the door for Bitcoin investors to see some of the best returns they can get. Thus, Bitcoin is one of the best cryptos to buy in anticipation.
To explain why, let’s take a look again at Luke Lango’s advice. His advice to investors is not made at random, and his recession take is not different. There’s a reason he and other more aggressively-styled investors are targeting tech stocks in the face of a potential recession. As Lango points out, tech stocks historically show close correlation with the performance of the S&P 500. Thus, there is evidence that these stocks will see healthy revenues in the aftermath of a recession.
So, too, does Bitcoin correlate with the broader stock market. In fact, it grows increasingly correlated with the market as time goes on. No, it’s not quite as close as the 0.88 correlation tech stocks have with the S&P 500, which Lango points out. Rather, Bitcoin’s correlation to the index is about 0.35. But, keeping in mind the fact that this relationship is getting tighter each month, there’s reason to believe it will continue performing similarly. Keeping in mind its massive market cap of $736 billion, there is reason to believe Bitcoin is one of the best hedges against a bearish stock market.
Cryptos to Buy Ahead of a Recession: Solana (SOL-USD)
Solana is not in the same league as Bitcoin nor Ethereum in terms of fundamentals; its $26 billion market cap pales against the two industry giants. But, it stands to be one of the best cryptos to buy in the wake of a recession because of its huge growth potential.
The Solana network is its own layer-1 dapp network, which makes it a direct competitor to Ethereum. It seeks to distance itself from Ethereum by making a name for itself as one of the highest scaling networks available. Today, the network is putting through nearly 3,000 transactions per second on average. Overall, developers say the network is capable of tens of thousands of transactions per second. They assert that the network can theoretically process 710,000 transactions at a time.
Its performance is glaringly different from Ethereum, and its gas fees are much lower as a result. But its growth is where Solana really shines through. The network saw a massive influx of new users in 2021, and it’s expected to continue this growth in 2022. The fall of last year saw a significant growth period for the network; as non-fungible tokens (NFTs) boomed in popularity, Solana was able to steal much of the market share from Ethereum thanks to users looking to dodge Ethereum’s high gas fees.
This market share comes with a jaw-dropping growth in active users. In 2021, it passed two million active users in a given month for the first time ever. If Solana were to keep up this growth, it would be a very appealing growth play in 2022.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.