Crypto Investment Ideas for 2023 & Beyond
Crystal ball gazing
Welcome to the alpha please newsletter.
I asked this question on Twitter and received a ton of interesting replies from my followers.
I thought it would be fun to embed some of the replies that resonate with me and use it to highlight my own ideas in various categories.
I expect some of these ideas to pay dividends in 2023, but there’s no doubt many will also play out on a longer time horizon. Expect many wrong takes as well. After all, no one has a crystal ball.
And this is definitely not investment advice. Just ideas from one anon on the internet.
Overall crypto market in ‘23
Go on then, I’ll make a speculative prediction. I personally feel Bitcoin and Ethereum have put in their cycle bottoms and anticipate that they will both close the year at a higher value than their starting point.
Despite my expectations of a challenging first quarter for the market due to macroeconomic factors, I anticipate that the year 2023 will be characterised by a significant amount of sideways movement. I see this as a unique opportunity for investors to acquire assets that have the potential for substantial growth in the coming years. Adopt a long-term perspective for the year 2023.
ETH & L2s
I think Picolas has it right. Ethereum has the Merge behind it and will forever have improved tokenomics. Withdrawals from the beacon chain will happen soon and the percentage of ETH staked will dramatically rise by the end of the year. Ethereum will outperform Bitcoin for the foreseeable future.
Liquid staking derivatives are currently doing quite well relative to the rest of the market. I expect LDO, RPL and FXS to all increase their user base and TVL. The safest bet is always the market leader - LDO.
L2s will continue to mature. There will be ecosystem investment opportunities across all of the major rollups. I’ve been vocally bullish on Arbitrum and expect another strong year of growth. L2 TVL will rocket.
I think the OP Stack is going to get a lot of love in 2023 as well. The OP Stack is like the 'ERC20 standard' for constructing an L2.
Many ZK L2s will launch in 2023, or take the shackles off. We will also very likely see multiple L2 tokens drop.
In my opinion, one of the most lucrative investments for many individuals in 2023 will be the effort invested in obtaining L2 (layer 2) airdrops.
StarkNet, zkSync and a ZK EVM all gain some traction, but I think they will need more time to mature, in the same way that Arbitrum and Optimism took over a year to get into their stride.
MATIC will likely be a solid performer this year. Watch out for privacy focused Aztec too.
DeFi keeps getting stronger
Right now the total DeFi marketcap sits at $38B (Coingecko). That is absolutely minuscule when compared to the size of TradFi. The r/r here for the category is superb, albeit regulatory headwinds may exist in 2023.
DEXs will continue to gain market share from CEXs. GMX, GNS, dYdX and various trading platforms built on SNX should continue to grow in users. Loss of trust in centralised platforms acts as a tailwind for DEXs.
I think we will see various new verticals become more popular in 2023.
The TradFi interest derivative market is worth over $400T in notional value. This sub-sector within DeFi has enormous TAM potential. IPOR and Pendle are a couple of applications I am testing out.
I also think we get better and more useful options protocols. In 2021, for the first time ever, the notional value of daily options trading exceeded spot trading in the U.S. It is inevitable that the category grows in DeFi. I’m watching Dopex, Lyra and Premia.
Personally I don’t think options get widespread adoption in 2023, more likely 24/25. The TVL of options protocols sits at a measly $187M, that is surely set to grow a fair bit this year.
DeFi TVL should double at least by EOY.
Web3 gaming
In general, I think 2023 is more a year of building, but the value proposition of blockchain games will get much clearer. Accumulating the right projects in the coming year will likely set you up for explosive gains in 24/25.
Once mainstream gamers realise they can own their assets and use them across different universes then everything changes. We require two or three top tier quality blockchain games for this shift to take place. It will be gradual and then all at once.
I think we get at least one of these games in 2023. Illuvium is the most likely candidate and have already released multiple games in private beta. There is a lot of ILV unlocking on a daily basis in 2023, so it will have to overcome a fair bit of sell pressure. There will be opportunities to profit from NFTs and in-game assets for those paying attention.
Millions is a stretch, but all depends on the team’s ability to ship.
Treeverse is another game I have been following. I actually wrote a long newsletter about it a year ago. Their NFTs have done very well since inception and have caught a bid in the last few weeks. The recently released pre-alpha gameplay is looking great.
Progress towards an interoperable gaming universe will be made. Betting on one game’s token is a fairly risky approach, but there is a project that allows you to invest in the growth of a token that backs an entire catalogue of interoperable games: MAGIC.
AI
Everyone is aware that AI is going to accelerate this decade, but it still isn’t necessarily that clear (to me at least) how you can take advantage of this as a crypto investor. It’s not an area I have an edge in. That being said, I have been poking around TAO for a while and it seems to be a project that could emerge as a leader in this category. With ChatGPT being valued at $29B recently, the AI narrative is running hot. I think it could persist in 2023, but bigger gains are likely to come a few years later.
Be warned, it is not easy to buy this token currently, much better to wait for trustworthy exchanges to list, or a DEX on-chain. Here is a video if you want to dive deeper.
Apeing AI small-caps might pay off big, just beware how speculative this category is currently.
Storage
I’m a big believer that various protocols focused on storage will be huge winners in the long run. Solana has completely offloaded their data to Arweave. It’s essential that we have storage focused blockchains and it seems like this could be a good category for long term investors.
App-chain thesis
ATOM should be the primary beneficiary of the app-chain thesis gaining more traction. 2.0 rollout will eventually begin, interchain security will give the token more value. Recent move of dYdX to the Cosmos ecosystem shows the belief developers have in it.
Atom has also been one of the strongest performing L1 tokens in the last six months and this should continue in ‘23.
I’ll also be monitoring Sei Network’s launch. Sei is an orderbook DEX chain using the Cosmos SDK. The chain is purpose built for an orderbook. This means Sei can provide not only the decentralized, permissionless nature of a DEX but also the speed and capital efficiency of a CEX.
Avax’s interoperable subnets could provide competition for ATOM in the app-chain category.
Last time I looked there were 600+ subnets on testnet. I would assume a fair few of these launch in 2023 and we see a lot more activity.
RWAs
It’s inevitable and necessary for real world assets to come on-chain if crypto and DeFi is going to go mainstream. We will see the acceleration of this in 2023.
As of today, the majority of Maker’s current revenues are coming from RWAs. This is needed for the creation of safer and more structured credit markets in DeFi.
Centrifuge are making great strides bringing RWAs on-chain.
Assets Financed - $ 230M
Total Assets Tokenized - 988
TVL Growth (YoY)+ 80%
UI/UX
I’m hoping crypto UI/UX in general takes an enormous leap forward in 2023. I tend to agree with Issh that products that nail the user experience will do very well.
Nested is attempting to be the front-end of DeFi, abstracting away all complexity, and focusing on accessibility for retail users. If you are a regular alpha please reader then you will have seen that we have created portfolios on Nested. It really is an elegant platform. Write up below:
Account abstraction will also be incredibly important for onboarding more people into crypto. StarkNet and zkSync support account abstraction. Argent’s wallet is the best example of a secure, easy to use mobile wallet offering easy access to DeFi.
EigenLayer & Celestia
There was no mention of these two in the replies to my question, but I think both are going to be huge for the space this year.
In 2022 Celestia shipped three testnets, but in 2023 Celestia will launch on mainnet. Celestia token will very likely launch with an FDV in the billions.
Great explainer here on Celestia for anyone unfamiliar:
EigenLayer is a protocol that modifies Ethereum at the base client layer which allows validators to rehypothecate their ETH stake to validate other protocols simultaneously in parallel.
It allows validators to re-use their staked ETH that is already being used to secure Ethereum to validate other protocols such as oracles and data availability modules.
A lot of folks are very excited by its potential.
I highly recommend reading New Order’s write up on EigenLayer for a deeper dive.
Interestingly, EigenLayer could provide competition for Celestia. One of the flagship products of EigenLayer is a Data Availability module.
EigenDA does have an advantage over Celestia. EigenDA wouldn’t have to bootstrap a large validator network, they simply have to convince a lot of ETH validators to opt in. Also, unlike Celestia, EigenDA is not a consensus layer, so it will be lower cost and higher throughput.
There is no mention of whether EigenLayer will have a token. We will have to wait and see.
And that’s your alpha.
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.
Great alpha, thanks a lot :)
In hindsight some of this was absolutely amazing, especially TAO. I can't even find what the price was at this time, but probably below 50 bucks. I think this one is going to be priced in the thousands