Expect volatility in crypto markets, experts say

BeInCrypto spoke with crypto market experts about what to expect for the rest of Q1 and Q2. Two themes were clear: expect volatility and look to the fundamentals.

2023 has been a wild ride for investors and traders. After ending 2022 feeling like we’d been dragged through the mud, Q1 has given us some reasons to be optimistic so far.

For example, the father of cryptocurrencies, BTC, is up about 33% since the beginning of the year, along with Cardano (ADA). ETH is up approx. 30%, and GNP is up 17%.

However, most of this positive price action came in January. February was a much more mixed picture, with a significant cooling in the market. The recent problems with crypto-friendly bank Silvergate have also caused some turbulence in the market. As we near the end of Q1, BeInCrypto reached out to a few experts to get their take on the market.

As always, act responsibly and don’t invest more than you can afford.

Look at the basics

Despite the fact that the start of 2023 is good, investors in particular should not be distracted by the possibility of quick returns. Not everyone is diligent in the markets; living life can mean you miss important price movements. As anyone familiar with the space will know, crypto markets are volatile and things can change suddenly. A modest return can very quickly turn into a modest loss.

Unlike 2021, today’s market is not a seemingly endless hype machine. Observers are far more cautious and skeptical than they were before. You can expect prices to reflect that.

Alex Yevlakhov, COO of Jumbo Exchange, believes that 2023 promises to be a year of “less promises and more product”. We can expect a shift towards “basic and working solutions that have already either proven their value or have an established user base.”

“As retail investors, we should pay attention to trends being laid out by prominent VCs and market movements. At this point, fundamentals seem to be ahead of promise. One should structure one’s investment/trading strategy accordingly.”

Be wary of AI tokens

One of the big movements in 2023 was AI tokens. However, there has been debate about the fundamentals of many of these projects. That doesn’t mean they’re scams, but they might not be the best projects for long-term, safe bets. One of the most prominent tokens was SingularityNET (AGIX) which was up 1,328% year-to-date through February 8. An eye-catching return.

However, the market has since cooled considerably, falling about 42% since its high.

Other tokens have had significantly more volatility.

Yevlakov believes that investors and traders should be wary of this trend for two reasons. “First, there is already a wave of bandwagon jumpers trying to create vaporware just to make money. Second, AI and Blockchain are not that congruent parts, and actual attempts to connect the two together will be a long and arduous process if possible.”

Reports have shown that gaming is becoming a mainstay of the Web3 ecosystem, accounting for nearly half of all activity on the chain. There can be great opportunities here, says Yevlakov. “Gaming and highly user-centric Dapps will continue to be valued by blockchain ecosystems and investors.

I expect this trend to continue to grow steadily in Q1 and Q2 of 2023.”

Invest conservatively in this environment

Nathan Thompson, Lead Tech Writer at cryptocurrency exchange Bybit, suggests a more conservative strategy to hedge against future volatility. “Although we’ve had a fantastic start to the year, the fight against inflation is far from over,” he says. “The risk of recession is very real.”

“Therefore, I would caution against fully deploying to the crypto markets at this stage and favor a DCA [dollar cost average] strategy into digital assets with strong fundamentals and income.”

A DCA strategy refers to investing a fixed amount at regular intervals (such as every week or month) rather than investing a large sum of money at once. By doing this, you can take advantage of both ups and downs in the market without having to predict their direction.

However, there is a downside. Because the market tends to rise over the long term, a one-time investment will yield better returns.

There is less risk of overestimation

If we haven’t made our point already, the next few months will likely involve high volatility. “Trading is and will be difficult,” says Giorgi Khazaradze, CEO of crypto trading platform Aurox.

However, that doesn’t mean you shouldn’t get involved if you have your wits about you. Compared to the hype of 2021, tokens on the market better reflect their underlying fundamental value, he says.

“The next two quarters and possibly throughout the year is the perfect time for investors to jump in. Investing for the long term rather than the short term. Valuations are returning to where they should be and companies are no longer overvalued.”

Khazaradze also warns against blind optimism. The bull market in crypto does not last forever. Even if people get excited and caught up in the hype, he cautions that we need to remember that crypto goes through cycles every few years.

“Everything about investing and trading is going to be about managing your risk. So when the next bull market comes into play, manage your risk appropriately and don’t expect it to last forever. It could end any day.”