Crypto Roundtable: Top Picks For 2023, Bitcoin's Price At Year-End, The Halving's Impact, And More

Summary Seeking Alpha asked a panel of analysts to assess the most important questions facing investors in cryptocurrencies. Predictions include whether regulators will approve a Bitcoin spot ETF and how the halving event will affect crypto prices. The analysts revealed their top picks, which miners and ETFs are worth investing in, and how they'd build a crypto portfolio from scratch. We’ve passed the midpoint of the year, and it’s the perfect time to look ahead to how the rest of 2023 will play out. In June, Seeking Alpha convened a roundtable of crypto analysts to assess the impact of the Fed’s rate pause decision on cryptos. Now, we’re back with a panel of analysts to ponder the big questions about the state of crypto in 2023 as well as the critical issues that will shape its future. Will the SEC regulate cryptos? Will the Grayscale Bitcoin Trust ( GBTC ) win approval to convert to an ETF? What price will Bitcoin (BTC-USD) hit by year-end? How significant is Bitcoin’s halving next year? Which is the best miner to invest in? What percentage of an investor’s portfolio should be in cryptos? What’s the top crypto pick for 2023? We’ll explore all these topics and more, but first, let’s introduce our analysts: Clem Chambers is CEO of blockchain research and development incubator Online Blockchain plc. Mike Fay is an independent analyst with a focus on Bitcoin, miners, and various digital assets. Kevin George focuses on stocks, cryptos, FX, and commodities. Logan Kane covers cyptos, gold, macroeconomic trends, portfolio strategy, value investing, and behavioral finance. Kennan Mell uses his expertise as a software engineer to analyze the use cases for cryptos. And John Miller has a background in economics and often focuses on the impact of the Fed and SEC on cryptos. What is your top crypto pick for 2023? Logan Kane : My top crypto pick for 2023 is the Grayscale Bitcoin Trust (GBTC). I believe Bitcoin is the only game in town for crypto, and that the unique circumstances of GBTC make GBTC the best way to play Bitcoin. Mike Fay: My top crypto pick for 2023 was Polygon (MATIC-USD) back in December of 2022. Given the recent news that the SEC believes that coin is an unregistered security, the YTD performance has not been what I'd hoped at the start of the year. While I personally view Polygon as more of a digital commodity since it's a gas token on the Proof of Stake chain, I view recent weakness as a buying opportunity. Polygon may not finish the year where it started, but I imagine it will close out the year well ahead of these recent lows. Kennan Mell: Bitcoin is my top crypto pick for 2023. While Ethereum (ETH-USD) has the potential to eventually surpass Bitcoin as my top pick, we need regulatory clarity on whether it's a commodity before that can happen. I think that it would be foolish to make any other coin my top pick considering the tendency of most altcoins to die off once their hype fades. John Miller: Top idea for the next six months: Bitcoin-adjacent names with an angle, like Grayscale’s Bitcoin Trust or a basket of miners. Clem Chambers: I like Presearch (PRE-USD) because it has a solid product that works and it’s lowly valued. I’ve tucked some away, but this is a pure punt. Kevin George: Investors should look at projects that are offering a service and operating similar to a stock. Consider the market cap of the project, and what it could become with corporate adoption. What do you foresee as the biggest event for the rest of 2023 that will affect investors? Kennan Mell: The event that would have the largest impact on my crypto investment strategy is a verdict in the SEC's lawsuits that clarifies which cryptocurrencies are securities. If Ethereum is ruled a commodity, I would be comfortable allocating a larger part of my portfolio to Ethereum, as regulatory risk is the biggest issue that I see facing Ethereum today. However, we may not be fortunate enough to get a final verdict on this in 2023. Clem Chambers: It’s all about the SEC. There is only one call: Do they want to regulate crypto, or kill it? So, benchmarking what happens next will clarify the choice, and that is key for the short and medium term for crypto, in the U.S. at least. Mike Fay: For Bitcoin, the biggest catalyst is a potential dovish Fed pivot, in my opinion. Bitcoin is well-positioned as the "inflation-hedge" crypto given its supply cap and stock-to-flow ratio. As for Ethereum and many of the alts, I think investors need to keep an eye on the SEC, the Commodity Futures Trading Commission, and any crypto-related bills that may pop up in Congress. The early June performances of Solana (SOL-USD), Polygon, and Cardano (ADA-USD) have made it quite clear that the market doesn't want these things labeled unregistered securities by the SEC. Logan Kane : The biggest story in crypto this year in terms of making money as an investor will likely be the GBTC conversion case. There's a ruling in the case expected sometime in the third quarter of this year, and GBTC is trading at around a 30% discount to net asset value as of my last look. The way that works out is you get a great return on your money if the appeals court allows GBTC to convert to an ETF, which the court has shown some willingness to potentially allow. There's downside too, if the court denies the appeal, but activist activity around GTBC means that the lower it goes, the more pressure will be ramped up on the company to correct the discount. Kevin George: I think Binance could be the spark for another bear move. it is the largest exchange by a factor of around 10X trading volume. With the Binance Coin (BNB-USD) near the 2022 lows, a break lower could worsen the company's balance sheet and solvency. John Miller: With regulatory battles heating up, nothing may be more important than the Ripple (XRP-USD) litigation . On the merits, Ripple looks to score a big win for the space by demonstrating the inadequacy of the Howey Test in application to the crypto industry. The arguments are nuanced, but the court may find that current XRP trades do not implicate securities laws, and that Ripple was not given fair notice of the law due to regulatory confusion. The upshot being increased ease of access and trade for coins and tokens that are not classified as securities. Where do you see the price of Bitcoin at the end of 2023? Kevin George: I think it will test $20,000 again. As we saw in 2022, a bearish move can take time to reverse. Clem Chambers: I still haven’t given up on $13,000, but the most likely answer is $25,000. The way Bitcoin is riding out the regulatory disaster zone, almost any price sub-$100,000 is possible, but I remain a bear sitting out this crazy dance. John Miller: Highest probability scenario is a volatile rise into the halving event early next year, with an April/May target of $35,000. So my year-end estimate is ~$30,000. Mike Fay: I don't usually like giving price forecasts, but I assume by the end of the year we'll have already seen the Fed stop hiking rates. Provided there isn't some sort of black swan event that specifically impacts Bitcoin (very possible), I don't see why Bitcoin shouldn't be trading closer to $35,000. The question is do we get one final washout down to $20,000-21,000 from our current $26,000 level before that happens? I suspect it may happen. How significant is the Bitcoin Halving event next year, and how will it affect Bitcoin’s price? Kevin George: It's significant because it changes the reward structure for Bitcoin mining and will change the outlook for mining firms. There will likely be some form of speculative positioning ahead of the event, but where that starts from depends largely on the SEC with cases against Ripple, Grayscale and the two largest exchanges. Mike Fay: History shows the halving is followed by a new all-time high within 12 to 18 months. I see no reason why that won't be the same this time around provided there isn't a global coordinated effort by governments to destroy the mining sector. So long as there is demand for a decentralized payment network that can't be controlled or manipulated by central actors, the coin will have value and the miners will have a home somewhere. Kennan Mell: Historically, Bitcoin's price has been tightly correlated with its halving cycle, and the months leading up to the halving event are typically bullish. Halving is also bullish from a fundamental perspective because it decreases the amount of new Bitcoin being created. Granted, each successive halving event has less impact than the last; the block reward going from 50 to 25 would be much more significant in absolute terms than if it goes from 6 to 3, for example. Clem Chambers: It’s the key event. Bitcoin is not going away in the US, at least not until the exchanges are shuttered and the off ramps barricaded. Then the next takedown is EVM chains like Ethereum, because it has names attached to shackle. By then crypto will be gone from the US anyway but it will still flourish in many parts of the world that need a crypto or want a thriving new tech engine of growth and productivity. John Miller: The highest probability outcome is that positive sentiment and positive expectations surrounding the halving event drive price action over the next year. With a basic balance and equilibrium in both the regulation battles and interest rate policy effects, I expect strong, though not parabolic, increases in digital asset prices into the Bitcoin halving. Speaking of sentiment, how would you assess investor sentiment toward cryptos? John Miller: Broad sentiment is currently mixed, up from negative. I am operating under the assumption the current cycle is in a denouement phase, following the recent bull and bear phases. Historically digital assets are best invested in during times of negative sentiment; so now is the time to insure full investment and begin to rebalance toward medium risk names. Put simply and differently, buy dips over the coming months with a goal of not chasing the rally into the Bitcoin halving later in the year. Mike Fay: I think investor sentiment is split into two categories. The retail investors who have stuck around since FTX seem less concerned than the institutional investors. The latter of which have been exiting the market judging by the 8 consecutive weeks of crypto fund outflows as of mid-June. For retail, market sentiment indicators that I follow suggest the fear isn't as extreme as price may be suggesting. Kevin George: I think strong adoption into DeFi was reversed by central bank rate hikes. The money showed that it was fluid and went to the safety of government investments, or FDIC-insured savings. The Terra issue and FTX then added further damage to institutional appetite and I don't think the recent SEC comments on Binance are helpful. Only when the regulators clean up the structures of exchanges would large investment increase. Clem Chambers: If you judged sentiment by the price of Bitcoin you would have to say it is jubilant. If you look to the US crackdown by the SEC on crypto you might say it was investors behaving like partyers on the Titanic after it has hit the iceberg. Which (if any) of the crypto miners do you see as the best investment? Kennan Mell: I wouldn't invest in any crypto miner, a view that I first shared in 2021 before Riot Platforms ( RIOT ) fell 73%. Crypto miners have far too much counterparty risk and have yet to prove that they can be consistently profitable outside of bull markets. Historically, miners have underperformed the cryptos they mine. John Miller: Bitfarms’ ( BITF ) production relative to its enterprise value is a major bargain. Possible regulatory effects in Canada and Argentina are a negative. But Bitfarms has top class, experienced and conservative management. Mike Fay: My biggest personal allocation at this time is to Riot Platforms but I do have a position in other miners as well. I think Riot has the right mix of large Bitcoin stack, low debt load, and the high EH/s capacity. But to be clear, I'm not really sold any of these companies are great long-term investments unless transaction fees permanently become a meaningful portion of the block reward. Kevin George: I would avoid large miners such as Riot. The company has built a big facility but there are hints of miners moving some mining abroad to a less-intense regulatory structure. It would not be possible for large miners to move their plants and they will have to sit it out and absorb the recent 30% tax announced by the Biden admin. Clem Chambers: I can’t like miners outside of moments when crypto goes vertical. Then everything’s good. However, when you look at the depreciation of mining hardware as its mining potency plummets and the mining difficulty function increases, the expensive equipment has a short commercial life. This leaves me failing to understand how miners can get a sustainable business from their large capital investments unless there is a need to make cash disappear at location X and Bitcoin reappear in location Y. This has a big value to some of course but only to the dark side. Outside of those kinds of opportunities I don’t see how the economics make sense unless the business has hidden variables. For 2023, are there any crypto/blockchain-related ETFs worth considering in terms of portfolio allocation? Clem Chambers: If the SEC doesn’t want them, I don’t want them. I’m bored with ETFs that don’t track and aren’t true to the ideal of an ETF. The SEC would do well to clean that Augean stable rather than monkey with crypto… but of course that industry doesn’t threaten fiat or insist on insulting government. Mike Fay: I'm not a huge fan of crypto ETFs for several reasons. There really aren't many that can even be considered and the ones that I've looked at have significant exposure to companies that I don't think are going to survive long term. I think investors are better off doing the work and picking the individual stocks themselves or with their advisors. Kevin George: I believe there is better upside potential in crypto projects than the current listed companies. Kennan Mell: I think it's preferable for investors to hold cryptocurrencies rather than crypto ETFs at this point. Most crypto ETFs have high exposure to crypto miners, which so far have given us nothing but questionable business models and terrible investment returns. Although the article is somewhat dated, I wrote more about blockchain ETFs last year. How will the Treasury’s outsized bond sales to replenish its coffers impact crypto prices? John Miller: Treasury’s outsized bond sales is a non-event. Theoretically this could raise rates and be a headwind for risk-on assets. But I am operating under the assumption we saw the local top in Treasury yields in October. Look for sideways trading in a channel at the current, slightly lower, rate levels until the core PCE inflation indicator meaningfully moves toward 3%. Clem Chambers: Liquidity up, crypto up. Liquidity down, crypto down. It’s worth realizing that interest rates do not need to affect liquidity, nor do bond sales. The Treasury basically sells bonds to itself anyway because the Fed and its proxies are buyers of last, and often first, resort and the Federal Reserve is the government. That’s how you get exploding money supply and inflation. The Treasury replenishes its coffers with a minute or two of typing at a keyboard. Whether that is linked to inflationary or deflationary monetary policy is a separate matter dictated by economic and political necessity. Kevin George: Significant buying of Treasury bonds will support yields and the U.S. dollar. Both are a negative for crypto. Mike Fay: That could certainly be seen as a potential headwind for crypto but I'd wager the impact will be less on Bitcoin than it is for traditional equities. Bitcoin is global. And there is clearly a motivation outside of the US to de-dollarized. There will be a bid for Bitcoin somewhere. The reality is Bitcoin was designed to be a new system of peer-to-peer payment outside of the old rails, and with clearly defined rules about inflation rates and supply. That's appealing to a lot of people and even sovereign nations as we've seen from El Salvador. What percentage of an investor’s portfolio should be in cryptos? If readers wanted to invest $10,000, what coins or crypto-related securities should they consider? Mike Fay: With the caveat that I'm not an investment advisor, my feel is that allocation to crypto should probably come down to how close an individual investor is to retirement. The closer to retirement, the less I'd personally speculate in crypto or blockchain tech. I'm 36, and I have about 10% of my liquid investable capital in crypto. That 10% breaks out to roughly 40% Bitcoin, 20% Ethereum, and then the rest is spread out over a couple dozen altcoins that I believe have high upside potential and ecosystem importance. Those include cryptocurrencies like Polygon, Thorchain (RUNE-USD), ZCash (ZEC-USD), The Graph (GRT-USD), and ChainLink (LINK-USD). Kevin George: Investors should be looking to put 5% in cryptos maybe. But they should avoid established tokens such as Bitcoin and even Ethereum. Also, avoid stablecoins. Staking can earn a yield, but U.S. [bank savings] deposits are backed by the FDIC and can't lose. Most importantly, China and the U.S, the world's two largest economies, have shown that they believe CBDC is the answer. Avoid any crypto that only wants to be a currency. They have depleted investors' funds for 5 years. John Miller: A good rule of thumb is no more than 15% of a portfolio should be in digital assets; plan for substantially less based on portfolio objective and size of other alternative holdings. A $10,000 portfolio for Investors without a digital marketplace account or with self-custody concerns: $2,000 ProShares Bitcoin Strategy ETF (BITO); shift to spot ETF when approved. $1,000 Grayscale Bitcoin Trust; safe, on-chain, at 35% discount, tax issues. $2,500 Valkyrie Bitcoin Miners ETF (WGMI); too heavy on Marathon Platforms (MARA), but otherwise strong weightings. $2,500 Ethereum, purchased through PayPal: safe, on-chain, but admittedly high fees for both buy and sell. $500 Grayscale Ethereum Trust (ETHE): safe, on-chain, at 55% discount, but tax issues. $1,000 Coinbase (COIN): tested, high trust, U.S.-based, strong CEO, plus major FUD discount. $500 Cash. Clem Chambers: If they don’t know, it should be zero. Crypto is an investment buzzsaw. You shouldn’t switch it on unless you know exactly what you are doing. Logan Kane : There's no right or wrong answer to how much to invest in crypto, but you shouldn't invest so much that you lose the ability to have a diversified portfolio. Rather than thinking of it as a fixed percentage of your portfolio, it may be helpful to think about crypto investments in dollar terms. Crypto is a high-risk, high-reward investment, and investors shouldn't invest more money than they're comfortable losing. For any amount of crypto investment, it's painfully clear that you need to ensure the cybersecurity of your investment. Using a regulated onshore brokerage, using two-factor authentification, and taking every recommended precaution with crypto is a must if you're not getting exposure through an ETF. Personally, I think if you have $10,000 to invest in crypto and can afford to lose most of it, I would put it all in GBTC, selling to collect the profit if the court rules in favor and the discount is erased.