People use a variety of strategies when investing in cryptocurrency. Some people invest in a single coin hoping that its value will rise. Others invest in a coin basket and spread their money across multiple coins to diversify their risk.
But, what is the best way to invest in crypto?
So let’s first understand Crypto Portfolio!
What is a Crypto Portfolio?
A well-balanced cryptocurrency portfolio includes a variety of cryptocurrencies with variable use cases and moderate risk levels.
When purchasing new cryptocurrencies or selling off holdings, the investor allocates a set amount of funds to each cryptocurrency and rebalances it as needed.
Maintaining the balance between your crypto portfolio and your overall investment portfolio is a critical part of a well-balanced crypto portfolio. Cryptocurrency is a high-risk investment; it should account for only a small portion of your total portfolio. A thumb-rule to investing and holding is to keep cryptocurrency to an amount not more than 10% of your overall portfolio. If the value of your cryptocurrency investments rises, you may need to sell some to keep your portfolio from becoming overly crypto-heavy.
Let’s understand the different ways to diversify your crypto portfolio.
- Focus on cryptocurrencies with different use cases
Cryptocurrencies have many applications, and they can help you decide where to invest. Here are some examples of crypto use cases:
- Payment Coin
- Blockchain Gaming Video
- Decentralized Finance (Defi)
- Metaverse Platform
- Personal Identity Security
- Non-fungible tokens (NFTs)
- Invest in the smart contract blockchain network
Blockchain networks that support smart contracts are some of the most popular cryptocurrency projects. A smart contract functions similarly to a blockchain-based program. This is a competitive marketplace because there are numerous applications for smart contract blockchains, including the creation of new crypto tokens and decentralized applications (dApps).
Cryptoneur Network Foundation also has a smart contract platform (CNFglobe) that is based on TRC-20 blockchain technology.
[Here we have mentioned the website of CNFGlobe.]
- Decide what you want to achieve
A crucial component of effective cryptocurrency investing is setting and achieving goals. You can position yourself for success and prevent common mistakes by having a clear idea of what you want to accomplish.
It’s best to start small and gradually raise your goals as you gain experience if you’re new to cryptocurrency investing. It’s critical to develop a strategy to achieve your goals after you’ve set them. This strategy should outline which coins you’ll buy, how much money you’ll put in, and when you’ll sell them. By making a plan, you’ll improve your chances of success and prevent making snap judgments that might cost you.
- Considering your risk tolerance
A simple way to determine risk tolerance is to logically consider how much money is held in cryptocurrency and ask yourself whether you could lose it comfortably.
Furthermore, it is important to keep in mind that some opportunities can help lower the risks connected with trading cryptocurrencies.
- Rebalance your portfolio regularly
Rebalancing your portfolio is a tactical tool that protects traders from taking on too much-unplanned risk. Rebalancing entails purchasing or disposing of assets to get back to a predetermined asset allocation. To achieve the desired level of risk or asset allocation, rebalancing is a periodic process that involves buying or selling cryptocurrencies or other investments held in a portfolio.
So, while it may be difficult to sell your cryptocurrency when it is rapidly rising, it is critical to remember that rebalancing is a key tenet of successful investing.
Highlights to build a well-balanced crypto portfolio:
- Divide your portfolio into high, medium, and low-risk investments and weigh them accordingly.
- Consider holding some stablecoins to help your portfolio’s liquidity.
- If necessary, rebalance your portfolio timely.
- Strategically allocate new capital to avoid overinvesting in any one area of your portfolio.
- Conduct your research. This timeless piece of advice simply cannot be beaten. Because you are investing your own money, you should not solely rely on the advice of others.
- Invest only what you can afford to lose.
Crypto Portfolio Site Trackers:
A portfolio tracker is a program or service that allows you to monitor the movement of your investments. You can track your progress and see how your current allocation compares to your long-term goals.
CoinMarketCap is a well-known price tracker with its portfolio feature. It is free to use on both desktop and mobile devices. Because it does not connect to your wallet or exchange, you must manually enter your holdings to use the portfolio tracker.
CoinGecko is primarily known for its cryptocurrency price tracking. It is also free to use on both desktop and mobile devices. The portfolio section is simple to use and allows you to monitor your cryptocurrency holdings as well as track changes to your profit and loss.
Conclusion:
Remember, there is more to balancing your portfolio than just holding multiple coins. A little strategy will go a long way in building a portfolio best suited to your risk tolerance.
