Key Points
I'm not confident enough in Ethereum or Solana to buy them at the moment, but that could change soon.
Bitcoin has already proved that it can largely hold its value in the current economy.
The same goes for Hyperliquid, though the underlying causes for its resilience are different.
Nine months into a bear market, crypto valuations don't look quite like the fire sale that one would expect. There are only two cryptocurrencies that I'm interested in buying in July -- and most of the majors don't make the cut.
Let's start by looking at a pair of coins I already hold but am not willing to add to at the moment, so you can understand what's special about them.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
Ethereum and Solana can wait
Ethereum and Solana are both up during the past 30 days, with the former gaining about 11% and the latter gaining 12%. Still, I'm not ready to touch either of them just yet.
The Iran ceasefire collapsed on July 8, and now we're back in the day-to-day high volatility that occurred before the ceasefire first took effect. Every past escalation has punished Ethereum two to three times harder than the crypto sector's leader, Bitcoin (CRYPTO: BTC), meaning that it probably is an unrewarding time to start a new position.
Solana is in a similarly vulnerable spot regarding its volatility at the moment. Sentiment about it is also somewhat stuck at a low point. The bigger issue, which it shares with Ethereum, is that its transaction fees do little to reduce the coin's circulating supply such that holders can be confident in getting a return over time.
Should that change for either asset, it will be another sign that they're worth buying again.
Bitcoin is standing tall amid uncertainty
I am, however, comfortable with buying more Bitcoin today. Throughout the current volatility, it has absorbed most of the bad news about economic headwinds and inflation caused by the war, dipping briefly before recovering. Its price mostly held up even throughout the worst capital outflow streak on record for Bitcoin spot exchange-traded funds (ETFs).
More importantly, after those outflows happened, and whenever Bitcoin's price falls a bit, buyers step in to buy the dip. For example, spot Bitcoin ETFs pulled in $221.7 million on July 2 alone, ending a 10-day-long outflow run totaling $2.7 billion. One day of inflows does not fix eight weeks of outflows, but the marginal buyer is returning, and that means the long-term trajectory looks intact.
Hyperliquid is igniting a renaissance of holder-friendly tokenomics
Hyperliquid (CRYPTO: HYPE) is a decentralized exchange that's notable because it's showing strength even during the bear market.
A big part of the reason it isn't struggling that much is because every trade on its exchange incurs fees denominated in HYPE, the chain's native coin, and nearly all of those fees are used to buy back HYPE on the open market automatically. So holders get the benefit of a tailwind that's a lot like a stock buyback, except that it's linked to trading activity. And Hyperliquid has so far been very effective at fostering that activity.
HIP-3, an upgrade that lets anyone willing to stake 500,000 HYPE coins to create a permissionless perpetual futures market for any asset, has resulted in a swarm of 24/7 markets for tokenized stocks, commodities, and assets like gold, silver, and oil. Unlike the coins that suffer due to war-related volatility, such as during the June Middle East strikes, Hyperliquid's oil markets stayed open through the weekend, meaning that it was one of the few venues open for price discovery while central exchanges were closed. That makes it somewhat more resilient against the economic ramifications of this particular geopolitical event, since it can generate fees that increase its token value during volatile periods.
Another reason I'm interested in buying Hyperliquid -- which I currently hold only through shares of a digital asset treasury (DAT) company called Hyperliquid Strategies -- is that no matter how the conflict shakes out with regard to stoking more inflation, the network's revenue is hedged against a Federal Reserve rate-hike cycle.
Per a recent agreement it inked with Coinbase Global and Circle Internet Group, it will be able to capture yield from the USDC stablecoins that traders hold on its platform as collateral. That means even if inflation rises and the Fed hikes interest rates (a move that would typically be disastrous for most cryptocurrency prices), Hyperliquid will actually get a bonus because it will earn more from the USDC on its network.
And given how unpredictable things are right now, that kind of hedging makes Hyperliquid look like an appealing investment.
Alex Carchidi has positions in Bitcoin, Ethereum, Hyperliquid Strategies, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Hyperliquid, and Solana. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.