Time in the Market: Ways to Approach Crypto Investing in 2023

Should crypto investors invest in 2023 after a rough year?

Crypto and NFT investors suffered in 2022. Bitcoin hit its yearly low on Nov. 21, almost a year after its all-time high of $69,044. How should crypto investors plan for 2023?

Before investing, this space has major risks.

As 2023 approaches, crypto investors must recognise macro and systemic risks. Russian energy sanctions caused an energy crisis during the Ukraine war. Markets remain unsettled by the US Federal Reserve’s inflation response. Recent crypto bankruptcies have caused market volatility, and regulatory pressure and miner capitulation are likely to continue into the new year.

The Ukraine war has hurt the global economy. Sanctions on Russian energy have caused a crisis in several European countries, with prices skyrocketing and supplies dwindling.

Government shutdowns and massive money supply expansions in response to the COVID-19 pandemic have caused global inflation to rise.

In 2022, central banks raised interest rates to combat inflation, lowering equity and crypto prices. Investors may suffer in 2023 if the Ukraine war escalates and inflation and interest rates remain high.

Crypto markets still feel Terra’s May collapse’s contagion. Bitcoin hit another cycle low in November after FTX failed. These major events still reverberate.

Many bankruptcy-declared firms may liquidate their crypto assets to pay creditors, which could cause new crypto market sell-offs. Investors should remember this in the new year.

The U.S. has been regulating crypto. In 2023, regulations will likely advance due to 2022’s dramatic events.

Regulatory clarity could help crypto attract institutional capital. Centralized protocols, stablecoins, and exchanges may experience short-term disruption. Tether or USD Coin (USDC) could be scrutinised by regulators, causing market turbulence.

Miners will face more pressure as Bitcoin prices fall. Capital-intensive bitcoin mining businesses cannot survive falling prices. Miners sell Bitcoin to cover costs, lowering the price.

Miner capitulation has marked the bottom of previous bear markets.

Despite these risks, the crypto market always surprises with Terra and FTX. Consider that when investing.

Cryptocurrencies and projects are not promoted here. It provides a risk-reducing investment strategy.

Some say cash rules. Keep cash reserves in a bear market because black swan events are hard to predict. Sniping discounted cryptocurrencies and NFTs during these events may be profitable.

Investing preserves capital. Bitcoin and Ether are good investments.

Research layer-1 and layer-2 blockchains, excluding Bitcoin and Ethereum, to invest in riskier assets. Spread exposure across blockchains that have survived a bear market and then look at promising new blockchains.

Solana, Avalanche, Polkadot, Cardano, and Aptos are layer 1s. Polygon, Arbitrum, and Immutable layer 2s. Research each project’s pros and cons before investing. Read white papers, roadmaps, and community.

Layer-1 or layer-2 blockchains are safer than applications. Ethereum is safer than Uniswap, an Ethereum-based decentralised finance (DeFi) application. Ethereum’s price is resilient to app failures because it has thousands of decentralised apps. If Uniswap fails, investors will lose money.

This is about risk management, not Uniswap.

Every layer-1 and layer-2 blockchain should have a backup investment option. For instance, a Solana bull might invest a small amount in Aptos, the “Solana-killer.”

Thus, Aptos is Solana’s Ethereum from one cycle ago. Shadow investments will build a balanced portfolio.

Last cycle’s Ethereum Name Service (ENS) and ApeCoin airdrops and Aptos (APT) airdrop are hard to forget. New, credible Web3 projects abound. Testing products requires an army. Early investors can receive token airdrops.

Previous Ethereum DeFi projects used airdrops extensively. No reason to think otherwise this time. 2023 will test many new projects.

Last cycle saw many exponential gain patterns. This cycle has similar themes. The last cycle hit ENS domains hard. As decentralised name services gain popularity, projects developing them may be worth watching.

DeFi did well last cycle. Metaverse and GameFi tokens did well. DeFi and GameFi could become big in a few years.

In recent months, SocialFi has launched several promising projects. Next cycle, this could be another ENS-like opportunity.

Memecoins did well last cycle, and Elon Musk’s Dogecoin is intriguing. However, invest in memecoins cautiously.

With diligence, this rule can work. a16z, Sequoia Capital, Solana Ventures, Coinbase Ventures, and others should be watched for their investments.

They don’t always choose well, but their portfolios are a good place to start and narrow down to a few good investments. After the crypto market bottoms, investing in new application-tier projects is smarter.

There is no crypto millionaire secret. Generally, buy low and sell high. Since market prices are low in 2023, start now.

Time in the market beats market entry timing. Investor returns increase as they stay in the market and follow the rules. Despite market cycles and volatility, crypto and NFTs are linear markets, and a diligent investment strategy should yield positive returns.