Introduction
Crypto trading, due to the volatile nature of crypto trading, isn't for everyone. In fact, trading is not the most profitable strategy because most people end up losing money in the long run. The most profitable strategy I recommend is to buy during the late stages of the bear market, which is right now, and holding for the long term. The trick is to fill your portfolio with quality projects that have a high chance to become popular again in the next bull run and allocate the right amounts based on their potential returns and your risk tolerance. I've said this in all my videos recently: bear markets are the easiest time to make money as long as you are patient, and right now is the best time to create a crypto portfolio because we're in the late stages of the bear market. The CPI number and the latest FOMC speech are showing that inflation is slowing down, and the U.S. Fed might start to pivot in 2023. The next Bitcoin halving is also coming in April 2024, and crypto bull runs usually start one year before the Bitcoin halving. Lastly, most leverage in the crypto markets have been washed out, lending platforms are all going bust, and greedy players like Celsius and FTX have all collapsed. All of these signs are showing 2023 to be the potential start of the next bull run.
Cool, onto the portfolio. I looked at several key factors of each project to determine whether it was a buy for me or not. Number one: will the token survive a prolonged bear market? Number two: how big is the fully diluted valuation compared to its competitors? Number three: is the project team still motivated to continue working on the project, or have they given up? Number four: is the project in a narrative that's likely to see hype again in the next cycle? Number five: is it the leader in its sector, and is the project continuing to grow by user adoption and money metrics? After looking at each project on these criteria, here is the complete breakdown of my ultimate crypto portfolio for 2023.
Bitcoin And Ethereum
First up, we have the biggest part of my portfolio: Bitcoin and Ethereum, which take up 25% each in this portfolio. This is because they're the safest assets in crypto and actually have super good ROI potential from current prices. Assuming Bitcoin and Ethereum can both make a new all-time high by the next bull run peak, with a conservative estimate of reaching 2x the 2021 all-time high, that gives us a target of $136,000 per Bitcoin and $9,600 per Ethereum at today's prices. That's an 8x return for both Bitcoin and Ethereum. No, they don't have 50x potential, but I'll never be upset with an 8x return within a few years. Bitcoin and Ethereum both have the highest chance of actually achieving these targets among all other cryptos, since they're the largest and most recognized coins. So, because of this, I'm allocating 50% of this portfolio to BTC and ETH.
Polygon
Next up in my portfolio is Polygon's Matic token, which takes up 5% of this portfolio. Polygon is the leading Ethereum scaling solution, and as Ethereum continues to dominate the decentralized application space, it's clear that Polygon will continue to ride the same adoption wave. Another reason why I'm bullish on Polygon is that, unlike other layer 2 scaling solutions, Polygon supports all types of layer 2 technology. They have POS sidechains, optimistic rollups, ZK roll-ups, app chains, privacy chains, or whatever new technology may emerge in the future. It's clear that Polygon's approach is to latch onto the Ethereum layer 2 narrative and adapt to whichever technology ends up being the winning solution. This makes them extremely flexible and highly likely to survive in the long run. For these reasons, I see Polygon as a no-brainer pick, assuming Ethereum continues to do well in the next cycle. One concern for Polygon is that they still haven't released most of their scaling solutions to support Ethereum mainnet. This is a clear distinction that people get wrong all the time. The Polygon Network you are using today is a separate layer 1 blockchain rather than a layer 2 for Ethereum. They call it a side chain, but it's technically not the full layer 2 solution yet. The layer 2 technologies of Polygon still haven't been released to the public. This is understandable, as Polygon wants to focus on all the layer 2 technologies to avoid missing the boat. But this means they're prolonging time to reach the market. Another downside of Polygon is its high valuation. Currently a top 10 crypto, it sits at a $7 billion valuation. Assuming Polygon's price pumps alongside Ethereum, it needs to outperform the 8x estimate of ETH to be worth the investment. And because of this, I haven't bought into the Matic position just yet. I'll continue to watch it.
Arbitrum
main advantage over Polygon is its exceptional technology, which is already live on the mainnet. Arbitrum's roll-up solution, Arbitrum 1, has been widely adopted by the Ethereum community for one and a half years and is currently the top choice for Ethereum developers. This is because Arbitrum heavily focuses on optimistic roll-up as its Layer 2 technology, instead of adopting multiple solutions like Polygon. However, this isn't to say that Arbitrum lags behind in technology; they are actively working on their own app chains called Arbitrum Trust and have already gained adoption from web 2 giants like Reddit.
The reason I chose Arbitrum over other competitors like Optimism or Mati is due to their larger ecosystem and user adoption. As a crypto developer and investor, I often encounter new blockchains with big ambitions but no user or developer traction. Building a successful ecosystem requires getting developers on board, and Arbitrum has achieved this. They've been able to sustain a high Total Value Locked (TVL) and low fees for the majority of 2022 without the need for additional incentives. This means that developers willingly choose Arbitrum as their network to deploy on, and users have a positive experience. I can personally attest to the user experience of Arbitrum, as it's second to none. Transactions go through in under two seconds, making it feel like I'm interacting with a traditional website rather than a decentralized app. This is in stark contrast to Optimism, which was unable to sustain its TVL and user base, even with their OP token acting as an incentive.
It's important to note that the Arbitrum token has not been released yet, but there's an opportunity to qualify for the Arbitrum airdrop that will likely take place within the next few months. I've made an in-depth video on how to get the Arbitrum airdrop; you can check it out with the link in the description. When the Arbitrum token eventually releases, I plan to allocate 5% of my portfolio to it.
Solana
Moving on to alternative Layer 1 picks in my portfolio, the first one is Solana. In the wake of the FTX collapse, Solana's price took a significant hit due to concerns about the relationship between the SOL token and FTX and Alameda. For perspective, Solana once had a market cap of $75 billion, and today it sits at only $4 billion. While we've seen the Solana DeFi ecosystem face challenges, it's important to note that this was primarily because the main DeFi projects had their private keys held by FTX and Alameda, specifically Sollet Wallet, Solana-wrapped assets, Serum, Radium, and Solend. DeFi users also pulled their liquidity out due to concerns about asset safety given Alameda's involvement with Solana.
However, when you look at real user statistics, such as daily active users and NFT trading volume, Solana's ecosystem is still thriving. It may not have reached the peak levels seen during the bull market, but it still has roughly the same number of active users as in the quieter months of fall 2021 and winter 2022. Additionally, its NFT trading volume is reaching new all-time highs. Factors like active users, network stability, enterprise adoption, and ecosystem activity have all remained the same or increased since Solana's peak in price. The only change is the negative sentiment surrounding the project. That's why I believe the current price of Solana at $10 truly feels oversold. It's at the same price as the lows in March 2021 before Solana gained popularity. Just like picking up stocks when they have strong fundamentals but are undervalued, this is the same opportunity with Solana. I understand the concerns stemming from its previous rally and crash, but it's essential to view Solana as an independent project that can continue to thrive.
Even if the SOL price only revisits its all-time high, it would still offer an 18x return in the next cycle. Due to this, I'm allocating 2.5% of my portfolio to Solana.
Cosmos
The next Layer 1 project in my portfolio is Cosmos. I've been a long proponent of Cosmos because their technology is widely adopted across various blockchains, second only to Ethereum. Back in 2018, Cosmos was already a significant infrastructure provider for new blockchains, and most major chains today implement the Inter-Blockchain Communication (IBC) protocol for cross-chain messaging, a protocol originally invented by Cosmos. The reason it wasn't popular before was its poor tokenomics. The ATOM token wasn't designed to capture the value from IBC's adoption.
However, in 2022, this issue has been addressed with ATOM 2.0. Over the next few years, Cosmos will focus on accruing value for the ATOM token, which will directly impact its price. This aligns well with the next crypto bull run in 2023 and 2024. Cosmos serves as the underlying technology for the interoperable blockchain narrative, which I see playing out in the next cycle. When the hype around interoperability surges, I expect the ATOM token to benefit from it. Therefore, I plan to allocate 2.5% of my portfolio to ATOM.