The primary reason to believe crypto investment opportunities should be lucrative in 2023 is obvious.
The crypto space generally moves with some negative correlation to the stock market and traditional financial systems. The relationship is far from exact, but any concerns about the financial markets usually translate to capital inflows into the cryptocurrency markets.
So, any further upsets and shocks will lead to lucrative opportunities in crypto. Those opportunities are lucrative because movements are outsized. It’s fair to assert that crypto volatility is greater than stock market volatility. Thus, gains are greater in coins and tokens than in publicly traded equities. Stick to the most established cryptos, which offer strong upside and relative safety.
Bitcoin (BTC-USD) has already proven to be a lucrative crypto investment so far in 2023. With price appreciation above 70% year-to-date, investors are well aware of Bitcoin’s lucrative upside and overall potential. It has massively outpaced the S&P 500 which is up 8% so far in 2023.
What’s interesting about Bitcoin in the pricing sense is that it clearly moves with the stock market positively: Both are up this year with BTC up much more sharply.
As the banking crisis proved, Bitcoin has value as a negative hedge. As shocks rippled through the banking sector stocks dropped but Bitcoin moved upward. Investors are well aware of that correlation.
Given that leading indicators and prominent economists expect a recession in the second half of this year, more shocks are likely to materialize.
Those shocks will likely originate in the traditional financial system which should again give Bitcoin a potent catalyst. Any recession is only going to strengthen the DeFi movement and BTC as a leading asset in the space.
Much of the same argument above applies to Ethereum (ETH-USD) as a solid investment. It has appreciated by roughly 65% in 2023 with a pronounced upward spike following the banking meltdown. Ethereum is the dominant platform that underpins so many other cryptocurrencies in existence today. It is therefore a barometer for the overall space.
The notion that Ethereum as digital oil is an apt analogy. The more activity there is in the cryptocurrency space, the better it is for Ethereum. Its smart contracts execute the programs that allow inter party transactions to occur on the internet. It’s fuel for the crypto economy.
Again, it’s reasonable to assume that Ethereum could see further catalysts in the form of future unpredictable shocks. Investors should assume that traditional finance and crypto will continue to converge this year.
XRP (XRP-USD) offers a ton of potential upside. The potential catalyst isn’t exactly a surprise to anyone and everyone vaguely familiar with the crypto space: Ripple should prevail in the court case brought against it by the Securities and Exchange Commission alleging that Ripple offered XRP as a security.
No one knows when that judgment will happen, only that many expect Ripple to prevail. If the judge declares XRP was a token all along, its price will rise. Again, not news to anyone remotely familiar with crypto and the case specifically. How much it could rise is the real question.
Speculation from late last year pegs that price range between $1 and $3.84. XRP is trading below $0.50 at the time of writing after falling because of Bitcoin’s failure to maintain a $30k price level.
The quick math therefore results in 100% upside in the worst case expected scenario. That’s a lucrative return by most any calculation.
USD Coin (USDC)
USD Coin (USDC-USD) actually isn’t a lucrative crypto opportunity in the same sense as other cryptos in this article. It’s a dollar-pegged stablecoin designed to mirror the U.S. dollar in price. So, it isn’t really expected to appreciate in price at all. Investors want it to remain at $1 indefinitely.
It’s lucrative in terms of its utility as a liquidity off-ramp for investors who want to turn their crypto into USD.
As a crypto investor one of the worst scenarios would be one in which your crypto assets suddenly appreciate but you cannot cash out. That’s what USD Coin and all stablecoins offer in terms of utility.
USD Coin simply is one of the major stablecoins that exist and is therefore worth holding. Tether (USDT-USD) is the most popular stablecoin and has a market capitalization 2-3X that of USDC.
I wouldn’t argue for one over the other but rather that crypto holders simply invest in either.
Solana (SOL-USD) garnered a lot of attention because of its potential as an Ethereum killer earlier in the pandemic. It was heralded as a potential Ethereum killer for one simple reason: Speed. Speed kills and Ethereum’s lack thereof became and continues to be a real liability.
The speed I’m referring to is transaction speed. The number of transactions a network can carry out in a given period of time (usually measured per second) limits scalability.
That’s a real problem for Ethereum as the standard bearer in the smart contract space. If it’s too slow, there’s a real issue: The ‘oil’ of the crypto economy mustn’t have bottlenecks otherwise scalability becomes a real issue.
But Ethereum remains slow with a TPS reading that has changed little even after the ‘Merge’ late last year. Meanwhile, Solana’s TPS reading is roughly 100X that of Ethereum at the time of writing. That suggests that if the argument about Ethereum successors arises again Solana will see sharp price increases.
Polygon (MATIC-USD) remains valuable for the simple issue just discussed: Ethereum speeds remain slow. Polygon is a Layer 2 scaling solution. Layer 2 scaling solution is simply jargon with Layer 1 blockchain referring to Bitcoin and Ethereum.
These so-called scaling solutions are simply technical fixes for issues that plague first generation, dominant blockchain protocols. Ethereum’s issue, as noted, is speed, or a lack thereof.
Polygon’s TPS is theoretically as high as 65,000 transactions per second. So, Polygon has utility as a sort of processor for Ethereum, which remains too slow.
In short, Polygon will remain relevant for as long as Ethereum is dominant and boasts slow transaction speeds. That looks to be the case for the foreseeable future.
Ethereum is the predominant smart contracts executor across cryptocurrency. And it is slow. Polygon traded near $3 at the height of cryptomania. It now trades for around $1 but has the same potential and utility it ever did.
I’ve probably written that Dogecoin (DOGE-USD) is a joke a dozen times before, but it’s a joke that can make crypto investors a lot of money. And since we’re discussing lucrative crypto investment opportunities, I’ll repeat those ideas once again.
Dogecoin is a joke based on a famous shiba inu meme. Both inspired Shiba Inu (SHIB-USD) the crypto, which itself is another joke. I’d assert that although both cryptos are funded by investors who realize as much, it’s a way to make money.
Shiba Inu and Dogecoin are synonymous in my mind. They’ve both become a mechanism for speculative crypto investors to grab returns on volatility. I think of them as gauges for speculation within crypto. If investors are behaving more erratically, SHIB should move in an outsized manner.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.