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Calling 2022 a disastrous year for cryptocurrencies would be an understatement. A significant correction is understandable because the asset class was in a bubble territory. However, there has also been a surge in cryptocurrency frauds, which has dented investor confidence. Thus, some of the hottest cryptos at the beginning of the year have been decimated.
Whether the industry survive is anybody’s guess. However, for risk-taking investors, this is the time to consider exposure to cryptocurrencies. The basic rule should be to allocate not more than 10% of cash towards this asset class. Indeed, if sentiment reverses in the coming year, multibagger returns are likely.
Amidst the carnage, there is good news. Blockchain applications in various industries are gaining traction. For example, the blockchain market in supply chain applications alone is expected to be worth $4.9 billion by 2027. Additionally, blockchain technology has application across multiple industries.
With this note of optimism, let’s talk about three of the hottest cryptos for 2023 and beyond.
Bitcoin (BTC-USD)
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Bitcoin (BTC-USD) can be likened to a blue-chip stock. If investors are betting on crypto recovery, Bitcoin is a must-have for the portfolio.
The good news is that inflation seems to be easing, and a weak dollar is positive for risky asset classes. A potential recession in 2023 might force policymakers to pursue expansionary policies. In this scenario, I would bet on Bitcoin doubling from current levels.
A Bitcoin halving is also due in March 2024, and that’s another upside catalyst. Historically, the cryptocurrency has surged after halving events. Hedge fund manager Mark Yusko believes that the upcoming halving event can propel Bitcoin to $100,000.
It’s also worth noting that Bitcoin has been consolidating around the $20,000 level. The collapse of FTX triggered another round of correction. However, with increasing institutional adoption, the long-term outlook for this crypto remains positive, particularly after a correction of more than 60% year-to-date in 2022.
Ethereum (ETH-USD)
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Ethereum (ETH-USD) closely follows Bitcoin as a blue-chip cryptocurrency. In previous bull market cycles for cryptocurrencies, major cryptos have surged, while altcoins have rallied with a lag. Therefore, it makes sense to remain overweight the top cryptos in this environment.
Ernst & Young Principal and Global Innovation Leader Paul Brody is bullish on Ethereum for 2023. Brody believes that industrial applications can be a potential catalyst for the cryptocurrency. This is in-sync with broader expectations of wider adoption of blockchain technology.
Another point to note is that the Ethereum Merge came at a time when market sentiment was bearish. I believe that the Merge is still not priced-in. Once market sentiment reverses, the upside potential for Ethereum is potentially massive.
A major benefit of the Merge is that the Ethereum network is more secure. Furthermore, a shift to proof-of-stake will significantly lower energy consumption. With sharding to follow, invstors have visibility toward lower transaction fees coupled with an increase in speed. That’s a bull case if I’ve ever heard of one.
Dogecoin (DOGE-USD)
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Amidst the crypto carnage, Dogecoin (DOGE-USD) has maintained its position among the top ten projects by market capitalization. With this token being inflationary, it might be unrealistic to expect Dogecoin to return to all-time highs anytime soon. However, I would not be surprised if the crypto doubles in the next 12 to 18 months.
The biggest reason to be bullish on Dogecoin is its backing by Elon Musk. Recently, Musk hinted at Dogecoin being accepted as a method of payment on Twitter. The cryptocurrency is already being used as a payment method to buy merchandise from Tesla (NASDAQ:TSLA).
Another reason to like Dogecoin is the fact that its transaction costs are low compared to Bitcoin or Ethereum. Furthermore, Dogecoin has a strong community and as the number of holders increase, there will be an incentive for companies to accept the crypto as a payment method.
On the date of publication, Faisal Humayun did not hold (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.
