2023 was a year full of surprises and challenges for the crypto industry.
Major banks collapsed, prominent figures like SBF faced legal troubles, and exchanges such as Binance, Kraken, and Coinbase were sued by the SEC.
On the other hand, BlackRock signaled its interest in a spot BTC ETF. It may feel like these events happened ages ago, but they only took place last year. In this article, we will discuss some valuable lessons that emerged from the crypto landscape in 2023.
Lesson 1: Take Expert Opinions with a Grain of Salt
Many macro experts predicted a significant decline in Bitcoin's price at the beginning of last year.
However, that didn't happen, and those who followed their advice were caught off guard by the market's unexpected rally. The lesson here is to have a backup plan and always be prepared for different market scenarios.
Even if you have a strong belief in a particular direction, it's essential to have some dry powder or a small crypto exposure to hedge against potential downturns.
Lesson 2: Challenge the Status Quo
The rise of Solana (SOL) is a prime example of challenging the status quo. Despite being one of the most controversial projects in the crypto community, SOL saw a meteoric price increase from $18 to $110.
This teaches us to pay attention to even the most hated projects and evaluate the validity of the criticisms directed towards them. By making contrarian bets and going against the consensus views, opportunities for significant gains can be found.
Lesson 3: Market Trends Change Faster Than Expected
The SEC's lawsuits against Binance and Coinbase in June 2023 caused widespread bearish sentiment in the market. However, just one month later, BlackRock's filing for a spot BTC ETF completely changed the market sentiment to bullish.
The lesson here is to take advantage of excellent buying opportunities when they arise, regardless of prevailing market sentiment. Conversely, when a coin reaches an extremely high valuation, it's wise to start taking profits gradually.
Lesson 4: Time in the Market Trumps Timing the Market
Trying to catch the bottom or sell the top of a market is a challenging task. Instead, it's better to focus on being consistently invested in the market.
Waiting for tokens to become laggards and investing in them may not be the best strategy. It's crucial to identify tokens with potential growth and buy them, even if they have already experienced significant price increases.
In a bull market, the potential for gains can far exceed initial price appreciation.
Lesson 5: Give Investment Theses Time to Play Out
In 2023, there were instances where coins with strong fundamentals underperformed for several months before suddenly experiencing significant price surges.
This highlights the importance of giving investment theses time to unfold. While it's crucial to review and cut losses when necessary, holding onto a coin that is underperforming but has improving fundamentals can still yield substantial returns in the long run.
Lesson 6: Study Historical Trends for Predictability
History often repeats itself in the crypto market. Observing the patterns from previous bull markets can provide insights into the current market cycle.
For example, Bitcoin has historically outperformed in the early stages of a bull market, leading to an increase in its dominance. Additionally, certain narratives, such as alt-L1 projects and GameFi, tend to perform well during bull cycles.
By studying what worked in previous cycles, investors can identify potential winners in the current cycle.
Lesson 7: Have Conviction in Your Thesis
Having more confidence in your investment thesis and being bold with your investments can lead to significant gains. While diversification is important, some of the most successful investors have built their wealth through concentrated bets. By carefully researching and analyzing projects, having conviction, and maintaining a long-term perspective, investors can reap substantial rewards