Down 45% Or More This Year, Are Any of These Once-Popular Altcoins Worth Buying?

This year's crypto market sell-off has been violent and widespread, sparing few cryptocurrencies. With only a few exceptions, almost every top cryptocurrency with a market cap over $1 billion is down big for the year.

If you're willing to dig through the crypto bargain basement bin, though, that could present a unique buying opportunity. Some of the most popular altcoins of the past five years are selling at truly discounted prices. But are any of them actually worth buying?

The demise of old Layer-1 blockchain networks

The obvious place to search for value is amid the wreckage of the Layer-1 blockchain networks, all of which skyrocketed to eye-popping gains in the previous crypto bull market rally.

Due to their smart contract functionality, these Layer-1 blockchains have historically been the building blocks for everything that gets built in the crypto and blockchain world. In turn, that has justified their lofty valuations in the past.

Image source: Getty Images.

But just look at how far the mighty have fallen. Ethereum (CRYPTO: ETH) is down 45% for the year, as is Solana (CRYPTO: SOL). Avalanche (CRYPTO: AVAX) is down 50%, and Cardano (CRYPTO: ADA) is down a heartbreaking 55%.

All of these Layer-1 blockchains basically do the same thing, so it's really a matter of picking one best-in-class winner and moving on. Right now, the market is saying Ethereum and Solana are the most likely winners, and I tend to agree. Even after a decade, Ethereum reigns supreme as the top Layer-1, while Solana has effectively been crowned the heir apparent.

For now, then, you can forget about Avalanche, which is down 97% from its all-time high. And the same goes for Cardano, which is down 95% from its all-time high.

They are in free fall right now, and there is little chance that they can regain their former mojo. Earlier this year, for example, Cardano's founder warned of a "wave of failures" coming to the Cardano blockchain ecosystem.

The rise of new Layer-1 blockchain networks

The safe bet is to back established Layer-1 blockchain networks, such as Ethereum, that have proven their mettle over the past decade. They are big, diversified, and increasingly trusted by large institutional investors.

A riskier move is to investigate the growing number of purpose-built Layer-1 blockchain networks that specialize in a narrow niche of the crypto world. They are not trying to be all things to all people and have largely avoided the worst of the crypto market carnage.

Take Bittensor (CRYPTO: TAO), for example. It's a purpose-built Layer-1 blockchain for AI. For the year, it's down 1%. But in a year like this one, that counts as wild outperformance. By way of comparison, Bitcoin (CRYPTO: BTC) is down nearly 30% this year.

Or, if you think the AI bubble is about to pop, what about a Layer-1 blockchain for stablecoins? You could invest in Stable (CRYPTO: STABLE), up 147% this year. It might not have Ethereum's long track record, but it's generating a positive return this year.

The best-in-class winners

The biggest Layer-1 blockchain networks appear to be wildly undervalued right now and could be ready to soar higher as soon as the crypto market bottoms out.

Take Ethereum. It's currently trading at $1,650, but some analysts' price targets for the world's second-largest cryptocurrency are as high as $10,000.

Or what about Solana? It's currently selling for just $70, but some analysts think its true value could be closer to $3,200.

In order to minimize risk, I'm sticking to the largest-market-cap names when digging through the bargain basement bin. Investors will need to be patient, but there's a legitimate case for investing in best-in-class Layer-1 blockchains that are currently trading at fire-sale prices.

Dominic Basulto has positions in Bitcoin, Cardano, Ethereum, and Solana. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Bittensor, Ethereum, and Solana. The Motley Fool has a disclosure policy.