⛔ Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.

It’s that time of the Bitcoin cycle when bottom snipers assemble to load up on the end-year fire sale. Bitcoin typically forms a price bottom 10 quarters after a halving event and the last halving was in Q2 2020.

Typically it is marked by miners turning off their machines and dumping their reserves to survive the “winter”. This would result in the hash rate dropping and marking the end of the final leg down to form the new price floor that would be the springboard for the next run.

The implosion of Terra/Luna, 3AC and FTX trio caused the major sell-offs in the last 12 months. But the contagion is not over. We still have residual contagion left in the system. Once there is clarity on the DCG/ Grayscale/Genesis situation and the miners stop selling, we may have confirmation of the bottom.

Other anticipated downward price shocks are the Mt Gox coin distribution, Silvergate Bank insolvency rumours, macroeconomic downturn and finally the potential liquidation of the MicroStrategy/ Michael Saylor. My read is we will have clarity on all of them by Q1 2023 and if not it would not have a significant impact on price after.

These events have certainly left many questioning the legitimacy of the industry. Is crypto a solution seeking a problem if it suffers the same pitfalls of traditional finance?

The Terra Luna Trio are the epitome of traditional banking. Opaque, flamboyant and centralised. The same traits that caused the global financial crisis that gave birth to Bitcoin.

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” - Satoshi Nakamoto

This was the first message stored in the genesis block mined. But one must not miss the silver lining of this aftermath. There are no bail-outs for any projects and decentralised protocols performed as designed. All 3 firms had to pay down their leverage positions on decentralised protocols first before declaring insolvency, to unlock the collateral which was at least twice in value of the loans taken out.

Alas, our regulatory friends and traditional financiers have the perfect excuse to flex their raison d’être. They will use this series of events to advance their agendas. The governments want to launch their centralised digital currencies (CBDCs) and the big banks want to have a piece of the trading volume of centralised exchanges. But I believe well-engineered DeFi protocols will weather this storm and live up to the mission of levelling the playing field for the disenfranchised and unbanked.

On to the question I get asked every day, do I buy now? It’s hard to time the bottom, but many on-chain indicators are flashing the buy signal. The MVRV ratio (it tracks the ratio between Bitcoin’s market cap vs the capital invested into the network) and CVDD (uses the age & value of BTC moving to new investors to create a floor) are testing the floor which signals extreme value.

On the other hand, one must not forget that there are a lot more systemic risks as mentioned above. We saw the greatest injection of liquidity into the economy in the last 2 years. It takes time for all the dominoes to fall. Theoretically, bitcoin could reach a low of $3,500. But I think anything below $10,000 is a generational buy opportunity.

Additionally, one must not forget about the potential time capitulation that will ensue. While price capitulation may be almost over (between Q4 22 and Q1 23), there is a high chance that we range for the next year (unless general liquidity in the economy improves). This would mean that any investment strategy should incorporate a yield component.

Thankfully, many protocols that demonstrated their ability to deliver during the market crash are generating sustainable revenue and redistributing it to token holders in the form of yield.

My strategy would be to hold a mix of tokens that can generate revenue (yield) and at the same time play to two types of strong narratives. The first being the privacy narrative and the other being the DeFi infrastructure. Both of these narratives will have their limelight when regulations kick into high gear next year.

Here is a list of my top picks and why I think they are a great investment. Be mindful of the above context and plan your entries accordingly.

Large caps

BTC

The granddaddy of them all. The heavyweight champion. The one that is sometimes used interchangeably to refer to the entire industry. It has weathered 12 years of fear, uncertainty and doubt (FUD). Yet it has only grown in adoption and value globally. It is un-censorable as most governments are coming to realise, transparent and neutral.

Risks: The rising electricity cost and increasing hash rates mean that miners with better economies of scale would start to wield more control over the security of the chain. Governments with deep pockets and the ability to ramp up mining capabilities (China) could pose a systemic risk in the future.

Deposit it on Thorchain savers to earn ~4% APY.

(https://app.thoryield.com/savers)

Marketcap: $315,487,903,247

ETH

If Bitcoin is the muscle, Ethereum is the brain. It brings the required infrastructure to allow trust-less automation and verification of value movement. It has won the application layer 1 war along with the ecosystem of roll-ups/side chains (Arbitrum/optimism/Polygon)

Risks: There is potential for OFAC regulation to affect the new staking model. Solidity is a pain in the arse to work with. There is still room for a protocol to come in and address these 2 shortcomings, but that window of opportunity is very small and decreasing.

Deposit it on Thorchain savers to earn ~6% vAPR / Instadapp for 9%

(https://app.thoryield.com/savers)

Marketcap: $145,831,629,377

LTC

Litecoin is seen as the silver of crypto if Bitcoin is the gold. However, the core dev team has been more active in improving the technology. LTC has adopted a privacy feature called MWEB. It recently introduced merge mining which allows miners to mine DOGE and LTC simultaneously. The team has also been focused on pushing the adoption of the LTC network in Africa. LTC’s next halving event is set to take place in July 2023. Typically it sees an aggressive rally up before that.

Risks: Litecoin’s adoption on the lightning network would require large adoption numbers to support the current valuation. Further, exchanges may be forced by regulation to censor LTC given it is a privacy-enabled coin.

Deposit it on Thorchain savers to earn ~16% vAPR

(https://app.thoryield.com/savers)

Marketcap: ****$5,448,665,865

ATOM

Cosmos is the leading layer 1 chain for infrastructure protocols. Infrastructure applications like Thorchain and Akaash use components of the cosmos protocol. It aspires to be the go-to protocol for interchain infrastructure support.

Risks: currently the tokenomics are poorly designed. It’s infinitely inflationary and the protocol does not have a sustainable revenue generation mechanism. However, a revamped tokenomics model is being discussed in the DAO and we should expect a revamp in 2023.

Deposit it on Thorchain savers to earn ~7% vAPR

(https://app.thoryield.com/savers)

Marketcap: $2,933,310,567

Mid caps

ZEC

The only privacy-focused chain that has been pushing the boundaries of decentralised privacy. There are talks of becoming a deflationary PoS smart chain by 2025. This would change the tokenomics and value proposition significantly. Combined with the 7-year accumulation pattern on the charts, this is like a rocket waiting to take off

Risks: Censorship by centralised exchanges because of new regulations

Marketcap: $517,368,969

CRV/CVX

CRV is the household name for deep stable coin liquidity. The low slippage AMM model combined with the 3crv and crv incentivisation model has cemented its position as the exchange where any currencies would go to maintain the peg. Any stable currency launching in DeFi ecosystem or CBDCs would/should list on Curve to gain deep liquidity and widespread adoption. To mitigate the potential downside of upcoming DeFi regulations, Curve is launching a new algorithmic stable coin called CRVUSD.

Risks: DeFi regulation on stablecoins can censor platforms they interact with as seen with the Tornado case. There is a risk that any stable coin that passes through Curve could face something similar if the governments take a heavy-handed approach on stablecoins.

Deposit CRV on Convex finance to earn ~21% vAPR

https://www.convexfinance.com/stake

Tip: use https://curve.fi/#/ethereum/pools/factory-v2-22/deposit to profit from the CVXCRV/ CRV arbitration.

Deposit CVX on convex finance to earn ~3.7% vAPR and votium bribes of ~27%vAPR. Total of ~30% vAPR. But take note of the 3 month lock in period.

https://www.convexfinance.com/lock-cvx

CRV Marketcap: $429,541,879 CVX Marketcap: $282,194,622

AAVE

AAVE is the first and biggest decentralised multi-chain lending platform. It has survived 1 full crypto cycle. The team is now creating LensProtocol and GHO stable coins which will work in close tandem with AAVE to reduce the collateral requirement and eventually compete with traditional banks for credit.

Risks: Long tail assets posed a threat to the collateral based model given the ability for actors with large liquidity to manipulate price and trade against the collateral positions. AAVE suffered a small attack recently and since has taken measures to halt long tail assets.

Stake on AAVE on to receive ~8% vAPR. Note: up to 30% of your funds could be used as liquidity insurance in the event of large price swings.

https://app.aave.com/staking/

Introducing: GHO

Marketcap:$859,264,553

Thorchain (Rune)

The only decentralised native cross-chain swap that aims to become a vertically integrated decentralised platform. Thorchain is the only protocol capable of bringing DeFi to non-smart contract chains like Bitcoin and Litecoin. Currently, the platform generates yield through swaps and distributes that to users of the Savers and Liquidity provision features. Soon Thorchain would have a lending model similar to AAVE but for Bitcoin, ThorUSD and derivatives. All of which would drive yield to savers or liquidity providers.

Risks: Thorchain is prone to be hacked like any of the other DeFi protocol. It has suffered 2 hacks so far. However, the team has improved security significantly since then.

Rune tokens need to pair with other coins like BTC/ETH for liquidity provision that would earn varying rates of yield. Take note, this is a liquidity provision (LP) mechanism which is subject to impermanent loss. However, Thorchain provides impermanent loss protection of 1% for every day of LP. Refer to this dashboard for the yield rates: https://app.thoryield.com/dashboard

Marketcap: $367,174,358

GMX

Futures are the most profitable and used function of a centralised exchange. GMX is the largest decentralised futures protocol. Regardless of how the market performs, the house always wins! Revenue generated from exchange fees is distributed to liquidity providers and the token holders. As a result, GMX is one of the rare few tokens that appreciated significantly in value during the bear market.

Risk: The GLP liquidity provision mechanism limits the depth of position one can take given the decentralised nature of the design. This is to ensure protection against liquidation of the entire pool during extremely volatile periods.

Stake GMX token to earn ~16% vAPR

https://app.gmx.io/#/earn

Marketcap: $338,543,297

Security tips

1.Always store your tokens on a hardware wallet (Trezor/ ledger are great options)

2.If you are buying any of the tokens above, use coingecko to find out the exchanges that offer it and click on those trading pairs to avoid falling prey to phishing scams

If you liked this article and want to see more in the future, like, retweet and follow me on twitter! @krenzx

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