By nearly any metric, 2022 was for just about every cryptocurrency. As a result of sudden market implosions and spectacular crypto collapses, there was a serious erosion of investor trust in crypto as an asset class. In a year that saw both Bitcoin and Ethereum plummet by more than 65%, risky altcoins were hit even harder, with some falling by 90% or more.
The big question, of course, is whether investors oversold some of those coins as part of a panicked flight to quality. If you're looking for a contrarian approach to 2023, then it's time to start looking for the hidden values in the crypto market. Here are three contrarian plays for the year ahead, with a brief explanation of why each could take off in 2023.
Solana
Solana (SOL 0.50%), which declined almost 95% in 2022, was one of the worst-performing cryptos. The year started off poorly, with a series of network outages for its blockchain, and it got steadily worse. For one, there was a collapse of the non-fungible token (NFT) market, where Solana had been making steady progress as a potential Ethereum challenger. And second, there was the spectacular meltdown of crypto exchange FTX in November, when investors panicked after realizing how prominent a role former FTX Chief Executive Officer Sam Bankman-Fried played in funding and promoting Solana.
CRYPTO: SOL
Key Data Points
As proof of just how badly investors panicked in 2022, Solana is already up a staggering 130% in 2023. Considering that it was trading around $34 before the whole FTX drama began, I'm setting $34 as the floor price for Solana by the end of 2023. That still represents a roughly 50% spike from today's price of $22. When you add in all the initiatives that Solana has planned for the year -- including the launch of a crypto phone and a comprehensive Solana Mobile strategy for Web3 -- the price has the potential to head much higher.
Avalanche
Avalanche (AVAX +0.76%) was another crypto dud in 2022, falling about 91%. In part, this had to do with underlying problems such as the failure to gain traction in any niche of the blockchain and crypto world other than decentralized finance (DeFi). And, in part, it had to do with investors giving up on Avalanche as a potential Ethereum challenger.
Back in 2021, Avalanche was a potential "Ethereum killer." But that was back when Ethereum was still a clunky, slow, and inefficient proof-of-work blockchain. Now that Ethereum is a faster, energy-efficient, and more scalable proof-of-stake blockchain, Avalanche suddenly doesn't look so great by comparison.
Image source: Getty Images.
Or does it? In January, Avalanche became the first blockchain to partner with Amazon Web Services, the Amazon cloud computing unit. Long story short, Amazon chose Avalanche over Ethereum. This could be huge news for Avalanche in terms of its future growth. As part of the partnership arrangement, Avalanche will become the blockchain of choice for any enterprise or government client of Amazon Web Services. As one of Avalanche's co-founders pointed out on social media: "This is a big deal. It's not your grandfather's AWS partnership announcement."
Cardano
Finally, there's Cardano (ADA +0.35%), down more than 80% in 2022. Investors have soured on Cardano because nothing ever seems to happen on the Cardano blockchain. There is upgrade after upgrade, announcement after announcement, and yet key metrics like total value locked (TVL) -- which is a popular indicator of overall blockchain activity -- never seem to move.
But that could change in 2023. Cardano is making an aggressive push into DeFi this year, thanks to a series of upgrades to its blockchain that have made possible smart contracts and other innovations related to DeFi, such as decentralized exchanges. There are plans to launch two Cardano stablecoins as well. These initiatives will boost TVL, and that, in turn, might finally convince investors that hey, there really is something happening on Cardano.
The year of contrarian thinking
All three -- Solana, Avalanche, and Cardano -- still rank among the top 20 cryptos in the world as measured by market capitalization. At one time or another, all of them have been held up as bright, shiny examples of where crypto is headed next, so it's hard to believe that all of them are suddenly 80% to 90% less valuable than they were 12 months ago.
Unfortunately, all three encountered a perfect storm in 2022. So many crypto projects were imploding, exploding, melting down, and collapsing, that investors panicked. This drove down the value of many coins below fair value. With this in mind, I'm giving a full seal of approval to these contrarian cryptos. There's plenty of underlying value for each of them, and each has a strong growth catalyst in place for 2023.
