These are my top risk-averse cryptocurrencies

After a strong start to the year, the crypto market has been trading sideways lately. There are concerns about the liquidity and ongoing viability of key crypto market intermediaries, as well as a significant amount of anxiety about further rate hikes by the Federal Reserve.

Against that backdrop, the race is on to find the best risk-averse cryptocurrencies. These are the cryptos most likely to hold on to their gains, even if the market starts to move down. These are also the cryptos that are less volatile when it comes to daily market movements, due to their superior long-term growth prospects.

Image source: Getty Images.

Bitcoin

The starting point is Bitcoin (BTC -0.38%), which remains the most popular crypto in the market for both private and institutional investors. At a current price of $22,385, Bitcoin has a total market capitalization of more than $432 billion, which represents approximately 40% of the market capitalization of the entire crypto market. For many investors, Bitcoin is the first crypto they ever add to their portfolios, as well as the crypto they are most likely to buy and hold.

While everyone knows about the huge gains that Bitcoin is capable of producing, what may not be as well known is how well Bitcoin has bounced back from past market crashes and crypto collapses. In its history, Bitcoin has staged at least five different comebacks, including once in 2011 when the price of Bitcoin nearly fell to $0.

Against this backdrop, Bitcoin’s 65% decline in 2022 is not as worrisome for longtime crypto investors. Remember: Bitcoin fell 73% in 2018, but later recovered and eventually rose to an all-time high in 2021.

While Bitcoin has been notoriously volatile of late, it is actually losing much of its famous volatility. Traders are now actually complaining that Bitcoin is not volatile enough, as the crypto has been trading in a relatively narrow trading range since mid-2022. In fact, Bitcoin is starting to trade much more like a big tech stock than a risky crypto in 2023.

Finally, Bitcoin is becoming increasingly diversified on an international scale as it becomes an important part of the global economy. Brazil has just introduced a comprehensive framework for the use of Bitcoin, while other countries are looking to increase the use of Bitcoin in their financial systems. The latest survey on Bitcoin payments highlights the potential for Bitcoin adoption to grow 50% by the year 2025.

Ethereum

Another risk-averse cryptocurrency is Ethereum (ETH 0.17%), which has a massive market cap of $191.6 billion, second only to Bitcoin in terms of market size. Like Bitcoin, Ethereum has become a popular crypto for both retail and institutional investors, and now accounts for nearly 20% of the entire market cap of the entire crypto industry.

What makes Ethereum unique is the size and scope of its ecosystem, which now includes everything from non-fungible tokens (NFT) to decentralized finance (DeFi). It also includes blockchain games, metaverse platforms and decentralized applications that use smart contracts. This provides a huge amount of diversification and allows Ethereum investors to diversify away some of the systemic risk found in the crypto market.

Ethereum also remains the top Layer 1 blockchain network, giving investors peace of mind knowing they are investing in a best-in-class crypto. Back in 2021, it looked like a handful of Layer 1 blockchain upstarts could dethrone Ethereum.

However, last year Ethereum completed The Merge, which was one of the most famous feats ever in the crypto and blockchain industry. As a result, Ethereum is cheaper, faster and more efficient than ever. And this gives it a huge financial moat to fend off potential “Ethereum killers”.

Should You Buy Bitcoin or Ethereum?

At the end of the day, Bitcoin and Ethereum both offer an optimal mix of risk and reward. Both are capable of massive upside performance. At the same time, both are relatively less risky than other, more speculative coins in the crypto market. Sure, Bitcoin or Ethereum may not have the stratospheric upside potential of a new AI crypto-token, but you also don’t have to worry about Bitcoin or Ethereum dropping to $0 overnight.

I am positive both short and long term on these two cryptos and I believe they should be the building blocks of any diversified crypto portfolio. They are two cryptos you can buy and hold forever.