In the world of large-cap cryptocurrencies, it’s been a rough go over the past year. That said, 2023 has provided a much different start for investors who have seen their portfolios disintegrate in 2022. Accordingly, various positive macro factors including what appear to be cooling supply chain data and an upcoming consumer price report (anticipated to be weaker than expected) are being priced into most risk assets today. Thus, whether we’re talking about large-cap stocks or cryptos, the outlook appears to be relatively similar.
As of 2:15 p.m. ET today, BNB (BNB -1.18%), Polkadot (DOT 0.14%), and Chainlink (LINK 0.05%) surged 4.6%, 5.2%, and 5.7%, respectively, over the past 24 hours. These moves outpaced the overall market, which was up approximately 3.6% over the same time frame.
As most investors who follow the crypto sector are well aware, these digital assets happen to be much more volatile than most asset classes. In bull markets, that’s a great thing, with greater upside potential over relatively short time frames. However, with asset price pressure materializing in 2022, due primarily to tightening financial conditions, the game has changed.
This has meant that even the best utility-generating projects in the crypto world (I would include BNB, Polkadot, and Chainlink in such a grouping) have seen their valuations take a big hit. Given the inherent difficulty in valuing these assets, short-term price dislocations can take place. Thus, for investors who fear missing out on what could be a prolonged rally, buying at these levels certainly seems like a more attractive prospect than a week or two ago.
It’s important to keep today’s rally in context. Each of these projects has had to deal with its own individual risks, as well as market-related risks, over the past year. Whether those risks have been concerns around the overall viability of centralized crypto exchanges for BNB (Binance’s core token), fears of sectorwide declines in activity for parachain project Polkadot, or issues with decentralized application development that could adversely affect Chainlink, there’s plenty to consider.
That said, if activity begins to climb once again, and these projects are valued as the growth assets they once were, there’s a relatively simple thesis to buying these tokens here. Given how far they’ve declined, some significant upside could be seen when the next bull market becomes official. I’m not sure we’re there yet, but I think these tokens are certainly worth putting on the watch list right now.
Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ChainLink. The Motley Fool has a disclosure policy.