Before I write further, I should explain that the best bear market cryptos are much more different than bear market stocks. You can find many safe stocks, but no such thing exists in crypto. The crypto market as a whole is highly cyclical, and you will not find any safe havens in the event of a crash. This even includes stablecoins, many of which aren’t transparent about their reserves and use dubious algorithms.
Even though no “safe” cryptos exist, the best strategy in a crypto bear market is to allocate a small portion of your portfolio to well-established projects. If you are in no rush, sticking with big-cap cryptos, such as Bitcoin (BTC USD) and Ethereum (ETH USD), will pay off due to their long-term prospects.
Still, most people invest in cryptocurrencies solely due to the prospect of outsized gains, which is not possible when you invest in big-cap cryptos. In reality, cryptocurrencies still have very few real-life use cases, and I don’t see the top cryptos being multi-baggers if you buy at their current market capitalization.
With that in mind, the following list of seven of the best bear market cryptos includes both safe and highly cyclical projects. These ideas should suit both high- and low-risk investors.
Qtum (QTUM USD) is among the most decentralized blockchains, offering lots of flexibility. The project states on its site that it has over 500 nodes on six continents, and one of their biggest strengths is that they have been successfully combining the strengths of Bitcoin and Ethereum for over five years. The blockchain supports ERC20 and non-fungible tokens with meager gas fees, as its layer-1 blockchain is capable of supporting 1,100 transactions per second (or TPS). Moreover, by combining both layer-1 and layer-2 solutions, the project can potentially scale to millions of TPS, over time.
Nonetheless, the most significant aspect of this project that interests me is its Web3 proxy adapter, Janus. Developers can easily port their solidity-based applications to the Qtum blockchain, which will give Qtum an edge against other Ethereum competitors. Much like other tokens, QTUM is down from its peak. But in the next crypto bull run, I think this crypto can disproportionately outperform the market once the Ethereum network becomes congested (again) and developers move to other blockchains for lower fees. The Qtum blockchain’s flexibility will keep it among the top choices for these developers.
PAX Gold (PAXG-USD)
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PAX Gold (PAXG USD) is among the safest bear market cryptos, as it is a gold-backed asset. As Coinmarketcap explains:
“Each PAXG token is backed by a fraction of a piece of London Good Delivery gold bar, stored in Brink’s gold vaults, which is the approved storage company by the London Bullion Market Association.”
What makes PAXG special is that this crypto does not move in correlation with Bitcoin due to its gold backing. As gold surges due to inflationary pressures worldwide, so does PAXG, making this token among a handful of cryptos that could thrive in a recession.
Coinmarketcap also states that “According to the official white paperPax Gold was created to allow investors to buy indefinitely small amounts of gold through the cryptocurrency, thus virtually eliminating minimum buy limits for the commodity.”
However, PAXG is an ERC-20 token, which could make buying small fractions quite expensive unless you do it on a centralized exchange. Thus, I only recommend buying this token if you aren’t comfortable buying physical gold.
Going back to more cyclical cryptos, PancakeSwap (CAKE USD) comes to mind. It is similar to Uniswap (UNI USD) but works on the binance ecosystem. PancakeSwap is widely used for swapping new projects on the Binance smart chain.
Due to the crypto bear market, the CAKE token is now down 91.5% from its peak. However, the decentralized exchange still retains its popularity among crypto users, and I believe it can make a comeback.
If the crypto market continues its historical cycle, many new projects will be on the Binance chain. Thus, activity on PancakeSwap could spike in similar fashion to what we saw in 2021.
Moreover, there are $3.3 billion worth of assets locked on PancakeSwap against a market capitalization of $610 million. Compared to Uniswap’s TVL of $3.66 billion against a $5 billion market cap, there’s certainly more upside to this project.
HAPI Protocol (HAPI-USD)
HAPI Protocol (HAPI USD) is a cybersecurity layer that is aimed at preventing and notifying entities within the HAPI Protocol network about potential threats of money laundering, hacking, and other unauthorized transactions of funds. The most significant advantage of HAPI is its on-chain approach, eg, its on-chain database. HAPI works by aggregating transactional Blockchain data from multiple sources, including notable data providers such as Chainalysis. The project utilizes algorithms to combine that data and calculate risk scores based on risk categories and historical data.
Right now, HAPI is mostly a governance token. That said, the developers behind this project are actively increasing its portfolio of customers. This means HAPI is offering their services basically free. For DeFi, it is expected to remain free. For CeFi, the network’s API demand will dictate the cost.
HAPI can be used for data submission fees for the right to submit any information connected with a hacker attack or suspicious wallet address and governance. Token holders can also stake HAPI to be able to participate in the project governance via electing data providers, which involves staking HAPI to support or reject voting proposals.
This token can also be used for Oracle rewards for the review and audit work done on the submitted data. Any transaction made in the security oracle database for audit review requires HAPI, serving as a payment method to Oracles.
Finally, its connection to all many established projects will also make it among the top beneficiaries of Web3 development. This is why I believe its current market cap makes HAPI undervalued. I recommend researching more about the project on its site due to its complexity.
Polygon (MATIC USD)
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polygon (MATIC USD) is an established project that benefits from a congested Ethereum blockchain, without competing with it. It is a layer-2 scaling solution that aims to connect Ethereum with other blockchains, while solving its scalability problems.
As I’ve noted before, projects that seek to fix or remedy Ethereum’s scalability shortcomings usually surge when the Ethereum network is congested. It is no different for Polygon, as it supports almost all scaling solutions and can support up to 65,000 TPS on a single sidechain.
Conversely, I wouldn’t consider MATIC’s long-term upside potential to be too great right now. The upcoming Ethereum upgrades will likely aim to fix its scalability issues. I wouldn’t recommend holding Polygon when these Ethereum upgrades go live. That said, over the long term, there’s some impressive potential value to be had in holding this token in a well-diversified crypto portfolio.
Ethereum (ETH USD)
Ethereum is the crème de la crème of blockchains due to its innovative nature. Sure, the Ethereum blockchain might not have a massive TPS count to show off its speed and is quite expensive to use. However, this network’s impressive security and decentralization are second only to Bitcoin.
There’s a reason why blockchains that boast massive TPS counts are unstable. It is because they have to sacrifice security for scalability. Ethereum’s founder Vitalik Buterin calls it “The Scalability Trilemma.” We’ve seen it play out when blockchains like Solana regularly struggle with high traffic.
Ethereum’s safety is why most developers are in their ecosystem. Most NFTs, virtual assets, and tokens depend on Ethereum’s viability to continue to create demand. Combining that with regular upgrades and a focus on utility, ETH is set to generate notable returns in the long run.
Bitcoin (BTC USD)
If you aren’t targeting outsized returns, consider buying Bitcoin to de-risk your crypto portfolio. The world’s largest crypto project might not have smart contracts, but it has significant popularity, which drives demand. For those looking to invest in cryptocurrency, Bitcoin is often the first option that comes to mind. This is due in part to its status as the top digital currency by market cap and its high liquidity.
Overall, BTC’s upside potential is limited, but it is the go-to among the best bear market cryptos. Its safety, decentralization, and long-term prospects are more than enough to substitute for its lack of near-term price performance.
On Low-Capitalization and Low-Volume Cryptocurrencies: InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization of less than $100 million or trade with a volume less than $100,000 each day. That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators. When we do publish commentary on low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
ReadMore: How to Avoid Popular Cryptocurrency Scams
On the date of publication, Omor Ibne Ehsan did not have (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.
Omor Ibne Ehsan is a writer at InvestorPlace. He is also an active contributor to a variety of finance and crypto-related websites. He has a strong background in economics and finance and is a self taught investor. You can follow him on LinkedIn.