A bull market is coming: 1 crypto to buy now and 1 to avoid

The crypto market skyrocketed during the pandemic as several trends converged to make digital assets more mainstream. Social distancing and stimulus checks gave retailers some extra time and money. Fintechs like PayPal reduced friction by adding crypto support to widely adopted digital wallets. And meme tokens that Shiba Inu (SHIB -13.39%) and Dogecoin fueled hysteria by generating stunning returns in a matter of months.

Oh, how the tide has turned. This year, the crypto market sold off sharply as rising inflation prompted many investors to divest from risky assets. This led to forced liquidation of heavily leveraged positions, which caused the market crash to accelerate. The collapse of Terra blockchain and bankruptcy filings from crypto firms such as Celsius, Voyager Digitaland Three Arrows Capital also contributed to the chaos.

That said, investors can take comfort in one fact: the crypto market has recovered from every previous downturn, and there’s no reason to think this one will be any different. That means another bull market is almost certainly on the way.

With that in mind, here’s one cryptocurrency to avoid and one to buy now.

Shiba Inu: A meme token with little value

The Shiba Inu developer community is working hard to increase the meme token’s value with new uses and burning projects. A collection of 10,000 Shiba Inu NFTs, known as Shiboshis, went live last October and sold out in 35 minutes. Launched in June, the Shiba Inu metaverse allows investors to purchase plots of digital land that can be renamed in exchange for burning tokens.

More recently, the developer community teased a new Shiba Inu-themed game, Shiba Eternity, which will include the Shiboshi NFTs. And in the coming months, the launch of a layer-2 scaling solution (Shibarium) will move Shiba Inu transactions away from Ethereum blockchain to accelerate throughput and reduce gas taxes. This upgrade in particular could be a significant catalyst because it reduces friction for investors.

Together, these projects have created a lot of buzz. In fact, Shiba Inu is up 45% in the last month and more than 80% in the last year. But the fact remains that Shiba Inu is just an Ethereum-based meme token with very little real utility. It will never support its own ecosystem of decentralized applications (dApps) and decentralized financial services (DeFi), and it has not been widely incorporated into Ethereum-based dApps and DeFi services.

The most alarming problem, however, is the propaganda surrounding fire projects. The concept is simple: there are 589 trillion Shiba Inu tokens, and destroying a portion of this supply will increase the value of the remaining tokens. But there is a big problem with that investment thesis. It depends on the idea that people want literal throw away money.

For all these reasons, I think investors should avoid this cryptocurrency.

Bitcoin: A Scarce Digital Resource With Growing Institutional Demand

Bitcoin (BTC -9.00%) is fundamentally different from other digital assets. It was the first truly scarce crypto ever created — its source code enforces a supply limit of 21 million tokens — and that first-mover advantage has translated into massive popularity. Today, Bitcoin is synonymous with cryptocurrency, and its $458 billion market capitalization accounts for 40% of the entire crypto market’s value.

This popularity has also brought thousands of miners to the platform, resulting in a hash rate orders of magnitude higher than any other blockchain. That makes Bitcoin the most decentralized and secure cryptocurrency on the market, and that value proposition has naturally caught the attention of institutional investors.

Earlier this month, BlackRock (the largest asset manager in the world) launched a Bitcoin private trust for US institutional clients, and major banks that Morgan Stanley and Goldman Sachs have made similar moves. To that end, Bitcoin is the most popular digital asset among institutional investors, according to data from Fidelity. That’s particularly notable because institutional investors control over $100 trillion in assets under management, and a fraction of that wealth could send Bitcoin to the moon.

That makes the investment thesis crystal clear: Bitcoin is a finite asset, which means its price will rise in line with demand. And given its popularity among retail traders and institutional investors, there is good reason to believe that demand for Bitcoin will increase as the world becomes more digital. That is why risk tolerant investors should consider buying this cryptocurrency.