The best asset of 2023 is Bitcoin, however, caution must be maximized in dealing with it.
INTERVIEW with Víctor Ronco, business and marketing consultant, who has just published the book “Criptomonedas. La Revolución de los Activos Digitales”, Editorial Deusto.
-Víctor, are cryptocurrencies in such a delicate situation as it seems?
-Currently, the macroeconomic environment is in a delicate situation, and that translates into high uncertainty and volatility, from the price of cryptocurrencies to that of shares of large global corporations or even housing prices.
In any case, precisely when there is uncertainty in the markets and these are tinged with red, is when, historically and mathematically speaking, the best investment opportunities occur.
While it is true that this also applies to cryptocurrencies, one must understand that it is an environment with very low barriers to entry, and this makes both great projects and initiatives with dubious future pushed by millionaire communication campaigns to be listed.
Knowing how to understand and analyze the environment is fundamental, since in addition to cryptocurrencies there is a growing regulatory pressure yet to be defined.
-Why has this situation come about?
All investment markets were in a bubble due to monetary expansion by central banks since 2020. Some of that increase in money in circulation was passed on to the markets, from the stock market to cryptocurrencies, pushing the prices of virtually any asset to skyrocketing prices.
As, due to money printing inflation began to skyrocket, this led to an aggressive rise in interest rates worldwide from the end of 2021. The result was the end of the euphoria in the markets, and large appreciable depreciations in virtually every asset since their highs just over a year ago.
-Is 2023 a good time to invest in cryptocurrencies?
We saw 2022 as a year of sharp declines, but 2023 has started very differently. Without going any further, during January, Bitcoin was the best performing asset among all investment assets, and in the words of several private banking firms, it is “the best asset of 2023.”
In fact, it carries a revaluation of more than 70% as, in the wake of the banking crisis, Bitcoin and some large-cap currencies are once again behaving as a safe-haven asset.
In any case, caution must be maximized as uncertainty about the international economy is at its highest. Beyond 2023, next year the European MiCA regulation will come into force, which will improve confidence in the industry and thus favor the entry of capital, both from private and institutional investors.
-What should a person who wants to invest in cryptocurrencies take into account?
-As is popularly said, cryptoeconomics combines what one does not understand about economics with what one does not understand about computer science. That is why someone who wants to invest must have some notions of both to know what he is doing with his money. On the purely investment side, knowing key aspects such as risk management or even emotional management. As for the technological part, mastering the operation to manage funds between wallets and networks, knowing exactly what is done and how, since a mistake can mean irretrievably losing access to the money invested.
So the first investment a user should make before depositing a cent, is to invest in training and practice, and from there adapt their knowledge to the crypto market with conventional approaches such as technical and fundamental analysis.
-Is Bitcoin still the most profitable or is it better to invest in other cryptocurrencies?
-One must rely on prudence and proper risk management, making decisions based on data. Bitcoin was the first cryptocurrency, and almost 15 years later, and with hundreds of great innovative projects launched in the crypto market, it is still with more than 40% capitalization.
Bitcoin is today the most accepted cryptoasset to have exposure in the crypto market, both at the individual and institutional level, and this is thanks to its level its historical behavior, level of security and decentralization.
That said, it is true that the highest returns will come from smaller capitalization projects that know how to gain traction, mainly by offering real solutions to a gradually more mature market, both within cryptos and to companies in other sectors.
In any case, each investor should seek the balance between risk and expected return on an asset that fits his profile, and when in doubt, diversify and his portfolio in options with large capitalization and greater maturity in the market, such as Bitcoin.
-How which ones?
-If Bitcoin’s value proposition is established as a decentralized payment system with its own currency, there are other projects with interesting approaches. Ethereum was born to be a large decentralized global computer, which, in practical terms, allows you to create applications that run on its blockchain network.
There are more interesting ideas such as Polkadot, which allows interconnecting the different blockchains so that they can communicate with each other and exchange information and assets between them, something technologically complex, or initiatives such as Polygon, which work on Ethereum to make it more scalable and efficient.
Another example is BNB, the Binance Exchange and blockchain currency, which has a monetary model whereby coins are periodically removed from circulation so it has a deflationary pressure pushing the value upwards. First and foremost, it is necessary to understand the value proposition and technology behind a cryptocurrency, and to understand its function and monetary policy in order to evaluate it as a possible investment.
-Is it more advisable to invest in stablecoins? And in other digital assets?
-Stablecoins, representing the price of currencies such as the euro or US dollar, were born as a way to have liquidity in the crypto environment, but safe from the implicit volatility in the market. In this way they are a good way to have capital to have it working, from programmed purchase orders in a cryptocurrency broker, to passively obtaining profitability in “lending” protocols, which allow obtaining a small profit for lending funds.
-Why should one invest in NFTs or at least take them into account?
NFTs, or non-fungible tokens, are a technology that allows representing the value of something on the blockchain. In this sense, the NFT can be understood as a traceable property contract registered on the network, and therefore, the value of the NFT must correspond to the value of that which it represents.
For example, in collections of digital art in NFT format, the value of the NFT is that which has that “as virtual”, as in the case of NBA Top Shots. Similarly, event tickets are migrating to this type of token because it makes tickets more difficult to counterfeit.
In the most resounding cases where an NFT is simply based on a profile picture, and some of them have even been traded for hundreds of thousands of euros, its possession brings the holder access to an exclusive community and a sign of identity and prestige in the crypto culture.
-What do you think will be the future trend, will cryptocurrencies recover by 2024?
-Cryptocurrencies will recover as they have already done repeatedly in the face of similar moments in the past. Basically, because cryptocurrencies and cryptoassets backed by a solid technology and value proposition, are the spearhead of what blockchain can do in the face of infinite use cases, from the financial environment to other applications in different industries. Of course, countless projects and currencies will be left behind, and time will tell which ones and when, but these are natural cycles of a disruptive technology.