• In a bear market, look for cryptos with big real use cases and a loyal fan base, Sam Bankman-Fried said.

• "Hype-driven" coins tend to crash the hardest, he told Kitco News.

• The FTX founder said institutional adoption will create a "big set of inflows" in years to come.

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Bull and bear markets will come and go for cryptocurrencies, just like any market. The key to knowing which coins will weather a bear market well comes down to knowing what they're used for and what kind of support they have, according to crypto billionaire Sam Bankman-Fried.

Bankman-Fried, who founded FTX, one of the world's largest crypto exchanges, was discussing the outlook for the crypto market in an interview with Kitco News on Thursday, just as the likes of bitcoin, ether and altcoins alike were caught in a down-draught along with other risky assets, as markets reacted to the emergence of a new Covid-19 variant.

This year has seen a boom in mainstream adoption of cryptocurrencies, equally in well-known coins like bitcoin and ether, as well as newcomers with real-use cases, like the solana and cardano networks' tokens, and the so-called meme coins like dogecoin and shiba inu.

But with US interest rates rising, inflation running hot and the perception that the economy may be at risk from another wave of Covid-19, the outlook for 2022 is not quite as rosy, meaning any would-be investors need to know which cryptocurrencies are likely to be resilient.

"Generally, the projects that you see surviving the best are the ones that have huge, really loyal followings and the ones that have really important use cases," Bankman-Fried said.

Solana, cardano and avalanche are small rivals to ethereum, thanks to their ability to support smart contracts, which are used in decentralized finance, as well as popular applications like non-fungible tokens.

Cryptocurrencies are generally more volatile than traditional finance assets, with some, like dogecoin, rising as much as 100% in a day, only to surrender all those gains a week later, as was the case in April. The smaller the market capitalization of the token, the more volatile it is likely to be.

On Friday, while the Dow Jones fell 2.6%, bitcoin was down 7.5%, while ether lost almost 9% and solana's sol and avalanche's avax tokens lost around 10% each.

November has seen the rise of the metaverse, an immersive digital world where people game, own plots of virtual land or racehorses and dress their avatars with designer virtual apparel. This has also fueled huge rises in the tokens associated with the metaverse.

Decentraland's mana token shot up earlier in the week, buoyed by digital real-estate sales, but fell by 4% on Friday, while Axie Infinity, whose axs token has tripled in the space of two months, dropped almost 12%.

"I think the ones that seem more hype-driven often crash the hardest. But when you look at projects that either have a lot of real adoption, or the potential for a lot of real adoption, those are the projects that loyalists are going to be backing even during bear markets," Bankman-Fried said.

Another factor Bankman-Fried mentioned was that people look at whether or not the coin has an "important future that seems like it can't just be replaced by a competitor."

As far as Bankman-Fried, these ups and downs are all part of the market evolving.

"There will always be more crashes, there will always be more bull runs. My best guess is that over the next few years, we may see substantial institutional adoption of cryptocurrencies," he said.

"We've seen a number of large institutions 'soft-commit' to using them in one way or another, although they haven't started implementing that yet. That potentially provides a big set of inflows on the medium- to long-term horizon - over the next couple of years," Bankman-Fried said.

A July survey by Fidelity Digital Assets showed that 71% of institutional investors across Asia, the US and Europe said they will invest in digital assets in the future.

Read the original article on Business Insider