Best Crypto Investments of 2023

Executive Summary

It’s the question every crypto investor wants to know: “What are the best-performing crypto investments this year?”

Here’s your roundup of the top crypto performers for 2023 so far: Bitcoin, Ethereum, Solana, Bitcoin Cash, Ripple, and Stellar. These cryptocurrencies each offer unique advantages, from Bitcoin’s scarcity and high liquidity to Ethereum’s smart contract capabilities, Solana’s high-speed transactions, Bitcoin Cash’s affordability, Ripple’s fast transaction settlement times, and Stellar’s currency conversion capabilities.

In this guide, we’ll show you how we evaluate the best crypto investments, understanding a project’s fundamentals, the team behind it, its competitive advantage, and its tokenomics. Reading the project’s white paper, understanding the real-world adaptation of the token, and studying its user growth, market capitalization, trading volume, and liquidity are also critical data points.

We further compare the returns of crypto investments with traditional investments like stocks, bonds, and gold. The comparison shows that investing in bitcoin would yield higher returns than these conventional investments.

However, it’s important to remember the value of diversification in an investment portfolio to reduce risk and potentially lead to higher returns. While cryptocurrencies offer high returns, they should not replace the entire portfolio but rather serve as a part of a diversified investment strategy. (See our Blockchain Believers Portfolio for a rundown of our investing approach.)

Top Crypto Picks YTD in 2023

While doing independent research is always a good idea, a handful of cryptocurrencies have proven to be a worthy investment over time. Here are our top crypto picks of 2023 so far.

Bitcoin (+79%)

Bitcoin currently has the largest market cap of any cryptocurrency on the market, and its returns are hitting close to 80% for the year, putting it on track for its best annual performance since 2020. Not to mention, the token has many use cases, as many businesses already accept bitcoin as payment.

Bitcoin also has a high liquidity and trading volume and a competitive advantage due to its scarcity, as its maximum issuance of 21 million units will never change.

Ethereum (+57%)

Ethereum offers a competitive advantage over other cryptocurrencies because it’s a blockchain platform that allows developers to build decentralized apps and execute smart contracts.

Ethereum currently ranks second in market cap, and it stands to gain even more ground after its upgrade, which involved shifting the blockchain to a proof-of-stake model, allowing for greater scalability, as transactions and blocks can be approved more quickly.

Solana (+161%)

Solana was designed for high-volume and high-speed transactions, and it is already home to many projects that are taking advantage of these features, such as NFT apps and marketplaces.

It has millions of users on board and can process an impressive 50,000 transactions per second, all while doing so for a meager fee ($0.01).

Bitcoin Cash (+151%)

Bitcoin Cash offers faster and less expensive transactions based on the identical blockchain as bitcoin. On average, a Bitcoin transaction costs $59, while a Bitcoin Cash transaction costs less than a penny.

Additionally, unlike some lesser-known competitors, Bitcoin Cash can be purchased through most major exchanges, and each coin is only $246, making it much more affordable than buying a single bitcoin.

Ripple (+125%)

Ripple offers incredibly fast transaction settlement times, with most transactions settled in 4-5 seconds. Its fees are also very low, with the cost to complete a transaction being just a fraction of a penny.

Large financial institutions such as Santander and Bank of America also use Ripple as a transaction platform.

Stellar (+119%)

One major advantage of Stellar is that users can send one currency and have the recipient receive another. It also offers fast settlement times, with most transactions completed in 2.5-5 seconds.

Crypto vs. Traditional Investments

So, how does crypto stack up against traditional investments like stocks, bonds, and gold? Below, we’ll examine how traditional investments stack up against bitcoin, the most popular cryptocurrency.

As you can see from the chart above, investing $10,000 in stocks would give you a YTD return of $11,993, whereas a YTD return on bitcoin would give you $18,054.72.

While this doesn’t mean you should forgo investing in stocks altogether, re-investing some of your money in crypto can be a wise way to diversify your portfolio. While stocks are backed by centuries of market exposure and research, crypto offers a lower barrier to entry and more autonomy over your investments.

As you can see from the chart above, investing $10,000 in bonds would give you a YTD return of $10,256, whereas a YTD return on bitcoin would give you $18,054.72.

Bonds are generally less risky than stocks and offer a fixed income, historically making them a vital component of a diversified portfolio. However, the bond case has severely weakened over the past several years, as their yields have fallen far below-prevailing inflation rates.

Almost every major index of corporate bonds has fallen over the past several years, whereas bitcoin has offered a positive return every year since its existence.

As you can see from the chart above, investing $10,000 in gold would give you a YTD return of $10,400, whereas a YTD return on bitcoin would give you $18,054.72.

Bitcoin is much easier to transfer, as it can be sent anywhere in the world in minutes. It also has more divisibility, making it a better medium exchange for small transactions. However, bitcoin is more volatile than gold, making it a riskier investment. Therefore, keeping gold in your portfolio can be a great way to balance out your riskier crypto investments.

How We Evaluate the Best Crypto Investments

While investing in cryptocurrency can be a great way to diversify your investment portfolio, choosing which cryptos to invest in can be challenging.(Download our free Blockchain Investor Scorecard to make this process easier.)

To make an informed decision, you first need to look into the fundamentals of the project. This will often involve reading the project's whitepaper, which details a cryptocurrency's technical aspects and objectives.

The whitepaper can help you learn about the project's goals and what technology the team is implementing to achieve these goals. While whitepapers can contain a lot of technical jargon, a good whitepaper will have a clearly defined problem and solution to the problem presented. If the whitepaper includes a bunch of generic phrasing with little detail, this is a sign you should probably avoid investing.

It would help if you also looked into the team behind the project. We recommend reviewing Linkedin profiles to learn about team members' professional experiences and previous projects they've launched. If a team consists primarily of anonymous developers who don't reveal their identity, that's a sign you should stay away.

You also want to ensure you understand the competitive advantage of this project over similar companies or products on the market. Often, the best way to determine a competitive advantage is to study its use cases.

In other words, you need to figure out the real-world use cases that could lead to broader adoption. For example, one use case of bitcoin is that it can help those in areas with limited access to banking facilities participate in the financial world.

You can also learn about a token's traction by researching its user growth, market capitalization, and trading volume. We also recommend looking at the token's liquidity, which will tell you how easily you can sell your tokens. The higher the liquidity, the easier to exit your position.

Finally, you must ensure you understand the tokenomics, i.e., the supply and demand of a particular token. To delve into this further, look at the circulating supply (how many total tokens are in circulation), the total supply (the total supply of a cryptocurrency after all of the tokens have been circulated), and the maximum supply (the maximum amount of tokens that will ever be minted).

Investor Takeaway

While we can see from the above charts that bitcoin offers a far higher rate of return than other investment options, this doesn’t mean you should transfer your entire portfolio to crypto. Our approach is to keep no more than 10% of our investments in crypto, with the rest highly diversified among the entire stock and bond markets. (Again, see our Blockchain Believers Portfolio. Really.)

A diversified portfolio often reduces risk and leads to higher returns. The aforementioned assets are not highly correlated with one another, so as some assets appreciate, others will likely remain steady or fall.

To learn more about diversifying your portfolio and investing in crypto, Subscribe to Bitcoin Market Journal.