Where To Put $1,000 In Your Cryptocurrency Portfolio On New Year’s Day

The cryptocurrency market never sleeps. Yes, it’s even open at midnight on New Year’s Eve. So let’s pretend you got a $1,000 to invest and you want to up game in the wonderful and crazy world of crypto. Maybe you feel you’ve got enough Bitcoin to sink a battleship and need to diversify. Where do you go?

Investing in cryptocurrency projects today is a lot like picking stocks. Bitcoin is one thing. But there are the big blockchain protocols, led by Ethereum, and the newcomers who want to compete with Ethereum on price and transaction time. Then there are the hot sectors of 2020-21, like decentralized finance projects – best known as DeFi. (But you all know that, right?). In 2021, it was the NFT market.

Once referred to simply as “altcoins” – cryptocurrencies are spread out across a diversity of specialty sectors. Where do you put your grand, if you had just one sector to pick?

(Of course, there is no such thing quite yet as cryptocurrency sector funds – I think I may have just invented them. But, here are some sectors and a pick or two by those in the market.)

Ava Labs President John Wu likes the “Ethereum killers” going into the new year. Why wouldn’t he? Ava Labs is behind one of them – Avalanche Borealis, or just Avalanche (AVAX), a blockchain platform for private and public blockchains that allows for building and launching decentralized applications and smart assets.

“Ethereum 2.0 might have been a gamechanger two years ago, but this new generation of Layer 1s has beaten it to the punch,” Wu says. “Total Value Locked on chains like Avalanche is growing rapidly, leaping from a few hundred million in mid-Summer to over $10 billion by December as users are priced out of Ethereum. The assets that are migrating to these blockchains are staying there, because established blue chip apps and new entrants native to these chains are offering more opportunity for users.”

On December 31, 2020, AVAX was priced at around $3.17. It was $112.69 on Monday.

With the sheer number of “Ethereum killers” launching, competition is fierce for the longest-running smart contract-enabled blockchain. Whether ETH can come out on top again this year depends heavily on whether developers continue building on the platform, or move to the likes of Solana (SOL) and Polkadot (DOT), to name a few.

One thing this year has taught me about crypto is that it is fast-moving into the world of make-believe. If you thought cryptocurrency had one foot in the world of science fiction, then when you hear of things like NFTs and the Metaverse, your bias is fully realized. This is becoming some Caprica-level, out-of-this-world life style investing few veterans on Wall Street can even understand fully.

“NFTs have been producing some interesting use-cases for blockchain technology, and the asset class will likely experience more growth in the coming year, maturing further as the year progresses,” thinks Jack Tao, CEO of Phemex, a Singapore-based global crypto-derivatives exchange founded in 2019 by a team of ex-Morgan Stanley traders. Phemex competes with the likes of Coinbase.

For Tao, NFT spin-off industries in the GameFi sector have all created new use-cases for NFTs (think fake sword and new armor to fight the bad guys – or the good guys – whichever side you’re fighting for). He says the metaverse narrative – now a mainstream word thanks to the company formerly known as Facebook — has fueled concepts like “proof of ownership” of digital assets.

In GameFi, look for “the Play-2-Earn model,” says Tao. “It has been quite successful, creating in-game tokenomies for distributed players to earn profits. Next year, I expect to see more balanced forms of these platforms that have learned from the inadequacies of existing offerings.”

Tao did not mention any particular companies.

Clearly, it’s not an easy task to choose just one sector to start off the year. Cryptocurrency is a gamble anyway. It’s like do you go to the roulette table and bet on 0 double 00 or No. 7?

“If I had $1000 of free money, I would most likely give it away for carbon offsetting,” says Ilya Volkov, CEO, co-founder of YouHodler, Board Member the CryptoValley Association in Switzerland. (Oooh, is that a plug for Cardano (ADA) !?)

“The beauty of the crypto market is that we have so many options. I’m a big fan of the Barbell Strategy. Put the majority of your capital in safe, risk-free assets. Put the remaining capital towards risky, but potentially highly profitable investments. So, having a Barbell Strategy in mind and excluding traditional finance from the experiment, I would invest in the classics — Bitcoin and Ethereum,” says Volkov. “The rest would go to play with NFTs, Metaverse related projects; any new fancy coin and new promising blockchain protocols,” he says.

Bitcoin has become storage of value for both retail and professional investors. It’s been around forever. It’s the cryptocurrency everyone trusts.

But the big gains are coming from the altcoins.

“They’re definitely more volatile, riskier, and speculative,” says Sergey Ivanov, the CEO of Cryptology Exchange. The exchange is not open to those residing in the U.S.. “Those coins will need to really prove their value to investors. This was a great year for GameFi. I think 2022 may become the year for DAOs,” he says about tokens like Uniswap (UNI) and Aave (AAVE). DAO stands for decentralized autonomous organization. These are blockchain-based organizations often governed by a native crypto token. “More and more people are choosing decentralization as a theme,” Ivanov says, expecting that will remain a key power-point presentation for all crypto in 2022.

So it looks like the Ethereum killers, GameFi, any NFT play that is dependent mostly on blockchain-based games, and – perhaps – even DAOs. That last one by Ivanov would be a surprise.

The good news: no one says this is going to be a bad year for crypto.

“Few people would have predicted the renaissance of NFTs or Tom Brady wearing laser eyes a year ago,” says Wu from Ava Labs. “This is a market that changes in days, not years. A year ago, Bitcoin at $100,000 would have been an audacious goal. Now, everyone’s thinking bigger. Bitcoin is almost an afterthought.”