Crypto Markets 2023 will be ‘differentiate or die’ for investors

Crypto investors have taken it on the chin this year. Will next year be better? What are market participants and new blockchain startups excited about for 2023, especially after lessons learned from the Terra Luna and FTX disasters?

Forbes senior contributor Clem Chambers, who writes regularly on the cryptocurrency markets, said 2022 was Bitcoin’s Wile E. Coyote moment – comparing him to the cartoon character with a penchant for falling off cliffs.

“In general, I think the first half of 2023 will be the best time to enter the market,” says Alex Andryunin, CEO of Gotbit in Portugal. “We are actively investing in a large cryptocurrency sector and have over 700 coins in our hedge fund portfolio, but none exceed 2% of total capital. For 2023, you differentiate or you die,” he says.

Gotbit manages the markets of some 280 tokens from all sectors. Decentralized finance projects are seeing inflows because investors believe DeFi is the answer to centralized exchanges, of which FTX was one of the largest in the US. Other areas are not so hot.

“GameFi is bad, trust me,” Andryunin says. “Startups that haven’t released any products are in the best position. They were able to raise capital and are preparing to expand in the second half. But most of the existing GameFi projects in our portfolio suffered massive losses. They don’t have a working model for their token,” he says.

Gotbit’s favorite crypto wallet looks like this: 15% Bitcoin, 15% Ethereum
10% Binance, 10% Polygon
5% each for Chainlink, Cardano
Protocol, polka dots
Uniswap, Cosmos
and Aptos
. They also like the new Sui permissionless layer 1 blockchain, but it is not yet available for investors.

They are bearish on Litecoin
Stella Lumens, Eos and Monero
. “I wouldn’t recommend investing more than 1% of your crypto portfolio in them,” Andryunin warns from his Lisbon office a few days before Christmas.

Daniela Pérez, CMO of Moonland, a multi-channel, multi-player social metaverse game run by a company called Meta Studios in Miramar, Florida, believes GameFi survives 2203. Blockchain Company Qtum chose Moorland in November to be its foray into the metaverse space.

“I think a lot of projects have given (blockchain-based) games a bad name because they took advantage of them when the market was hot and didn’t deliver on their promises,” she says, without naming names.

Axie Infinity, a one-time GameFi darling, is trading around $7 as 2022 draws to a close. It started the year at $93.

“There are tons of projects that are creating amazing products and thinking long-term and how they can impact the industry and not just be a quick cash grab,” Perez says. “For us, we know how long it takes to create a good game experience. You can’t be surprised when tons of game projects fail, especially when they promise to create the ‘best game’ in six months.

Add to that the fact that only a small number of gamers play games on a blockchain. Most gamers still play on the PlayStation and X Box consoles which have been popular since the 1980s.

Perez said his company believes GameFi tokens will see a turnaround in 2023. In fact, if some of them don’t, they’ll be down 100% in just over 12 months.

“Gaming is just gaming, even though new games are on a blockchain,” Perez says. “It’s a booming industry. Just invest what you can afford to lose.

MORE FORBESThe richest crypto and blockchain billionaires in the world 2022

2022: It was a terrible year

This year has been a mess for crypto investors. Those who bought new coins in January 2022 lost almost everything. This is especially true for alt-coins. Bitcoin
is down more than 60%. Cardano is down 80%. Sandbox, a GameFi token, is down 92%.

FTX’s collapse in November is always a headwind for cryptocurrency investors. The sentiment is pretty bad, with the government blowing on bitcoin’s neck. In a world where anything goes now, so does crypto. The consensus has been that the government will never succeed in punishing bitcoin in particular, but will Tether
the next disaster that will spur governments just enough to crack down on bitcoin ownership and exchanges – who knows? Investors would be wise to assume the continuation of the crypto winter to begin 2023.

Another negative is that many crypto projects, venture capital funds like Sequoia Capital, and some pure-play cryptocurrency investment firms have kept cash accounts on the FTX exchange. Now uncertainty awaits them all. People in the industry expect more digging through the rubble of FTX early next year. The worse the title, the more the crypto drops.

The collapse of FTX and the Terra Network Coin Stable Failure of 2022 are two sides of the same coin: liars, leverage and loans.

“I remember that Terra is
business model was vigorously criticized in the community long before it finally collapsed,” says Ruslan Sharov, founder of Cheelee, a new GameFi platform that rewards users for watching short video streams.

“Many investors saw FTX’s strangely high growth rate, and last summer, when FTX was actively investing in dubious crypto projects, many in the community predicted that they would go bankrupt and the whole market would collapse.”

It collapsed and did not recover from this sale in early November. Bitcoin is down nearly 20% since bad FTX headlines started rolling in on Nov. 8.

FTX’s trading arm, Alameda Research, was suspected of market manipulation even before the Luna fiasco. A hedge fund or two announced it, bringing it to the mainstream on “end twit” – Financial Twitter. Criticism of a potential FTX drop was nowhere to be found on Bloomberg or CNBC until it all fell apart. Now its founder, Sam Bankman Fried, awaits trial after freeing himself on Bail of $250 million, which should not be confused with the amount he actually paid. (It was much less, a The Coindesk writer calculated.)

In April 2022, the Waves
blockchain – created in Moscow – accused Alameda Research of deliberately dumping its coins. “The FTX and Luna crashes are the cryptocurrency market’s natural healing from scammers and unsustainable business models,” Sharov says. “Experienced investors are taking advantage of this complex situation.”

For Sharov, if he had $10,000 to burn in crypto, “I would invest most of it in new Web3 projects”, he says, quoting his own company, of course. “The rest I would put in bitcoin.”

Just HODL Bitcoin, instead

From portfolio diversity to throwing all your eggs in one basket, Alex Reinhardt, a German entrepreneur and investor behind an Asian app called Elvn and new blockchain startup PLC Ultima says he loves bitcoin in 2023.

“I would only invest in one piece,” he says. “Bitcoin. There are many coins and various blockchains in the crypto market. The industry is getting bigger every year. But if we talk about the future, bitcoin has it. I would invest $10,000 in bitcoin and wait a few years for the next bull cycle.

Most alternative coins follow bitcoin. If bitcoin is down, others are often even more so. But if bitcoin wins, there is a chance that riskier alternatives will outperform. This is where diversification comes in. For crypto, it works more on the upside. When you hold a lot of different coins plus bitcoins, when bitcoin goes down, the rest of the portfolio goes down even more (barring very sophisticated and expensive hedging strategies).

“I think only a handful of pieces have a future,” says Reinhardt. “It’s hard to predict what will work well in the long term.”

This year ended with a notable trend. Due to the FTX debacle, bitcoin investors withdrew their crypto holdings from centralized exchanges like Coinbase and moved them into hard wallets.

According to a report, 88% of all year-end bitcoin volume was off-exchange – a 3-year high. The move signals a potential shift in investor sentiment away from centralized exchanges and could indicate greater confidence in bitcoin – as investors continue to hold rather than cash out their tokens.

Investors will be hard-pressed to find someone who has given up on crypto altogether. There are not a lot. Yet, investing in crypto is not like investing in stocks. These are not Polkadot actions. It’s the equivalent of a high-risk venture capital investment in a start-up, topped with a mixture of Russian roulette, where the wheel is sometimes rigged. Investor protections do not exist.

MORE FORBESFTX Failure Reminds Investors: Crypto Investor Protection Doesn’t Exist

Like the term “hodl”, the phrase “bitcoin moon” is just that – a combination of cutesy words that define a community of techies and scoundrels, greedy investors and thrill seekers.

Bitcoin may have already landed on the moon and is spiraling down to earth, for better or for worse.

Alas, for crypto investors (or gamers, if you want to call them that), the New Year has always been a time for making wishes and setting goals. So to that, “to the moon” in 2023.

* The writer owns bitcoins and owns tokens from Cardano, Polkadot, and Stella lumens mentioned in this article.


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