Bitcoin has been on fire lately! After a relatively quiet 2023, the king of crypto has awoken from its slumber over the past week. Bitcoin (BTC-USD) has gained over 13% in the last week alone, barreling over the key psychological $50,000 per token resistance level.
This recent surge signals that we may officially be entering a new crypto bull market. The last major Bitcoin bull run started in late 2020 after Bitcoin undertook its quadrennial halving event. Prices skyrocketed until a blow-off top in November 2021.
This time, the spark likely has more to do with an influx of institutional cash rather than the token’s upcoming halving. With 11 spot Bitcoin ETFs approved last month, billions in fresh capital is entering the crypto sector. Add on the fact that the next halving is likely happening in April 2024, and the stage seems set for even more fabulous fireworks this cycle.
When Bitcoin starts pumping, history shows many altcoins follow suit in a big way. Here are three to consider before they do.
As the second largest cryptocurrency behind Bitcoin, Ethereum (ETH-USD) has cemented itself as the most correlated altcoin when compared to this crypto benchmark. When Bitcoin pumps, Ethereum almost always follows suit. Historically, Ethereum tends to see amplified gains relative to Bitcoin, delivering even higher returns for investors.
I believe Ethereum is poised to outperform Bitcoin in the next major crypto bull market rally. It still has a smaller market capitalization than Bitcoin, giving it much more upside potential in terms of its valuation multiple. Additionally, Ethereum has recently become deflationary due to its proof-of-stake consensus mechanism and token burning. The token’s current annualized deflation rate sits around 2%, meaning existing Ethereum tokens become more scarce over time.
But what truly gives Ethereum an edge over Bitcoin as an investment is its role as the dominant smart contract-enabled blockchain network. Ethereum is the foundation for most decentralized applications and Web 3.0 use cases, from NFTs to DeFi. It is spearheading innovation in the blockchain space, while Bitcoin remains primarily a store of value commodity.
For these reasons, Ethereum has beaten Bitcoin’s performance in every bull market cycle. I expect this trend to continue in the next bull market, as more developers build on Ethereum and more investors recognize its network effects over other chains. The stars are aligning for potentially parabolic gains for Ethereum if Bitcoin’s momentum continues.
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Kaspa (KAS-USD) has seen tremendous growth over the last year to cement itself as a promising medium-sized layer-1 blockchain. With a market capitalization now above $3.1 billion at the time of writing, Kaspa is catching the eye of both developers and investors.
As I’ve discussed previously, Kaspa distinguishes itself through its unique DAG-based architecture called GHOSTDAG. By generalizing the blockchain into a directed acyclic graph structure, Kaspa is able to achieve significant scalability improvements in both transaction throughput and processing speed.
The protocol handles security and ledger ordering by distinguishing “blue blocks” created by honest actors from potentially malicious “red blocks.” The largest strongly connected cluster within the acyclic graph identifies trustworthy blocks to favor. This prevents attacks like double spends or transaction rollbacks. I think Kaspa has the potential to reach a market cap of over $10 billion if the project’s tech becomes more time-tested.
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Polygon (MATIC-USD) seems primed to ride any Ethereum bull run as a leading Ethereum scaling solution. Originally launching as a sidechain, Polygon has rapidly expanded its capabilities to become a versatile layer-2 network. Its core advantage lies in significantly improving Ethereum’s transaction speeds and reducing gas costs on the Ethereum network.
Polygon now has two main components – Polygon PoS and Polygon zkEVM. Polygon PoS offers compatibility with Ethereum smart contracts by functioning as a sidechain alternative. Polygon zkEVM replicates the Ethereum virtual machine environment with zero-knowledge proof cryptography to enable private transactions.
This multi-faceted approach aims to maintain Ethereum’s censorship resistance and security guarantees while drastically increasing scalability. Polygon essentially tries to offer developers the best of both worlds – Ethereum-equivalent functionality with faster and cheaper transactions.
Notably, Polygon’s roadmap indicates even bigger ambitions, including upgrading Polygon PoS to a zkEVM chain and launching new standalone chains. With abundant room for growth in both its network infrastructure and token price, Polygon could be one of the top performers if the crypto bull market returns in a big way.
On the date of publication, Omor Ibne Ehsan 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.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.