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Top Crypto Research Analyst on Market Outlook, Risk-Averse Investing – Business Insider

Crypto markets are known widely to both insiders and outsiders as unpredictable.
But prices can reveal little about a blockchain network’s health. For example, the altcoin Solana was down 84.6% on Monday from its all-time high, per Messari, while usage of its network had remained steady. And for the risk-averse, it may be hard to stomach headlines of large industry players like hedge fund Three Arrows Capital and centralized lender Celsius filing for bankruptcy. In a sea of FOMO capital allocators and stories of risky bets, the stigma remains that crypto is volatile. The narrative has prevented many from allocating in their portfolios or entering the space at all. 
A senior cryptocurrency research analyst at Messari tried to cut through the noise in an interview with Insider. Thomas Dunleavy explained why the industry may not fully recover for another six to nine months, and broke down how both risk-averse and news investors can manage their portfolios.
For now, a large variable in the recovery of crypto markets will be the macro, per Dunleavy. In the past several months, traditional equities have coupled with token prices. With the Federal Reserve’s attempts to combat inflation, investors are wary of risk assets in general. Per Fed Chair Jerome Powell, the US is not in a recession despite negative GDP growth for two consecutive quarters. 
“If your outlook for macro is that we’re going to be in trouble, it’s probably not a phenomenal time to start putting on risk-asset trades,” Dunleavy said.
Crypto markets could likely fully recover in six to nine months if the Fed cuts back on rate hikes and the US economy stops feeling the brunt of monetary tightening.
The analyst, however, says that crypto’s performance could likely decouple from equities due to The Merge. The set of upgrades on Ethereum’s network, which has experienced various delays, aims to address common complaints about performing functions with its blockchain. This could lead to quicker transactions speeds and better scalability.
If executed successfully, Dunleavy says institutional capital will come piling in and “meaningfully drive the market up.” 
“Folks like myself and others are excited about potential fundamental catalysts to come decouple from equities,” he said. “The Merge is the obvious catalyst for Ethereum because you need to decouple from equities with incremental flows that aren’t there today.”
It’s important for new investors, Dunleavy says, to first figure out what percentage of their broader portfolio they want to allocate to crypto. He added that anywhere from 3% to 5% could be reasonable if they’re an investor with the classic portfolio mix of 60% stocks and 40% bonds. 
“I would still put crypto in the risk-asset bucket for sure though,” he said. 
If they take a “long-term view” on their investment, it’s important for new cautious investors to dollar-cost average in. Dunleavy says expect volatility and if allocating to risk assets, allocate carefully so that you don’t invest more than you’re willing to lose. 
“If you think that this technology will underpin a lot of things that we will do in the future then the price today may not matter as much,” he said. “But it is painful when you buy ethereum at $1,700 and all of a sudden you look on Sunday, and it’s $1,400. It’s about just avoiding that mental challenge.”
Finally, investors should learn the nuances of various cryptocurrencies before going all in on specific altcoins. If they haven’t done that, Dunleavy says Bitcoin and Ethereum may be good early bets and entry points to get into the space. 
“This is a very valid way to invest rather than speculate on the long tail of assets that you don’t understand,” he added.

Check out: Personal Finance Insider’s picks for best cryptocurrency exchanges
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