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How To Build A Recession-Proof Crypto Portfolio In 2023

According to many experts, the world is on the brink of experiencing one of the worst economic meltdowns in recent history. All of the data and indicators provided by financial professionals and parameters, including the United States, point to a recession.

A recession affects all financial markets, including the crypto market, which can be a hard blow for crypto traders. Unfortunately, those with a cryptocurrency portfolio built casually will receive the most brutal blow in losses. 

So in this article, you will learn why you need to build a recession-proof crypto portfolio and how to create such a portfolio. 

Why do you need a recession-proof portfolio? 

So why do you need a recession-proof portfolio? In summary, it protects you from suffering a loss during an economic meltdown.  A recession is a significant, widespread, and long-term decline in economic activity.

Today, all the economic parameters indicate that most countries worldwide, including the United States, are technically in recession. The effects are seen in the increasing price of commodities and massive layoffs by companies in different sectors, from the tech industry to the crypto industry. 

Source: Kubera

An excellent example of these massive layoffs is that of Twitter, which forced more than 75% of its workforce, equivalent to 7,500 people, out of the company. Other big tech companies, such as Meta, Amazon, and Microsoft, laid off thousands of employees in 2022 alone. 

Companies in the crypto industry were included, as massive layoffs were witnessed in 2022. For example, Crypto.com laid off approximately 260 employees in June 2022 and has quietly laid off over 2,000 people within the year. 

All this economic turmoil has been affecting the crypto market, coupled with many disasters within the centralised exchanges, as in the case of FTX

Without a recession-proof crypto portfolio, you have a higher chance of making massive losses during this recession than someone with a solid portfolio. 

How to create a recession-proof crypto portfolio 

Below are the steps you can take if you are trying to create a cryptocurrency portfolio that can withstand any recession or economic turmoil.

Buy recession-proof cryptocurrencies

When you learn about cryptocurrencies, you will discover that some can survive and profit even in the worst bear market.

You can also call this an all-weather cryptocurrency, which means it can be profitable during the worst bear and bull markets.

Most investors, especially the newbies, made a mistake during the bear market of 2022. They shifted their investments to shitcoins, which can lose their entire value in minutes. A good investor should never try this, as it is unsustainable.

Below are recession-proof coins to invest in for 2023;

Bitcoin

BTC, Source: CoinMarketCap

Of course, there should be bitcoin in your portfolio. Right now, Bitcoin is unquestionably one of the best crypto-winter tokens to consider. Unlike the new digital tokens, bitcoin has established itself as a key player in crypto. Bitcoin has a proven record of surviving the worst economic times since its creation and is a great pick.

Ethereum

ETH, Source: CoinMarketCap

Ethereum is another cryptocurrency with enormous growth potential. After completing its transition from a PoW to a PoS mechanism in September 2022, the Ethereum network now uses less processing power while maintaining secure and scalable transactions.

Binance Coin

BNB, Source: CoinMarketCap

Binance Coin, or BNB, is the utility token of the world’s largest cryptocurrency exchange. Following the demise of FTX, Binance has risen to become the world’s leading cryptocurrency exchange. The Binance Coin is widely used because it is used to pay transaction fees on the Binance Smart Chain.

Tether

USDT, Source: CoinMarketCap

Tether is a high-risk, low-volatility cryptocurrency. If volatility risk is a concern, you may prefer a stablecoin like Tether. This cryptocurrency’s value is pegged to the US dollar, and its performance history shows that it has remained relatively stable. It is a good place to store your crypto assets to avoid volatility.

Polygon

Polygon (MATIC) is another all-weather cryptocurrency you can invest in as 2023 begins. Polygon (MATIC) is a good ecosystem for building in Web3 and was one of the cryptocurrencies that avoided more losses than Bitcoin and Ethereum this year. It is predicted to close ranks with Binance Coin in 2023 and overtake it in market capitalisation. 

Other cryptocurrencies you may add to your list are Cardano, Dash 2 Trade, and TamaDoge etc.

Diversify your portfolio

The major mistake that most people make when investing in cryptocurrencies is putting their money only on one or two types of cryptocurrencies. For instance, because of their interest in Bitcoin, most people can put all their investments into the apex cryptocurrency. 

How to Diversify Your Crypto Portfolio, Source: Cointree

The same applies to cryptocurrencies, just as in real life, where you do not put all your eggs in one basket. For instance, if you have about $100,000 to invest for the whole year in 2023, it is best to put only some of your money in Bitcoin.

Instead, divide the money into five parts for different cryptocurrencies: $20,000 for Bitcoin, $20,000 for stablecoins, $20,000 for BNB, $20,000 for Ethereum, and the remaining $20,000 for MATIC. 

All these are suggestions, but diversification helps you shield yourself from the harsh impact of the recession on one crypto asset.

Building a Strong Portfolio in 2023

While there is no way to predict what will happen to cryptocurrency during a recession, digital tokens with strong fundamentals, on the other hand, usually survive.  

By now, the reasons why you need a recession-proof crypto portfolio are obvious. You can build a recession-proof crypto portfolio with the proper steps, such as purchasing recession-proof cryptocurrencies and diversifying a crypto portfolio.

Ultimately, your longevity is more important than your return, and only a recession-proof portfolio can afford you such an opportunity.

 

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