Did you know that you need to balance your cryptocurrency assets through having a cryptocurrency portfolio which is a good way to improve your investments’ risk adjustment?
You may have an idea about cryptocurrency but are wondering what a cryptocurrency portfolio is and why you should know about it. This article will walk you through the reasons why you should consider having a cryptocurrency portfolio. For further knowledge of the crypto world – price predictions, broker reviews, and more turn to the Dart Europe website.
These days news of cryptocurrency taking more and more of the financial market and making more and more people invest and want to invest in it too. This is why new crypto traders may want to know ways of handling their crypto investment, and one of the best ways to do that is to invest and create a crypto portfolio.
What is a cryptocurrency portfolio?
A cryptocurrency portfolio is software that crypto investors use to manage their multiple crypto investments, meaning one has to have more than one kind of crypto investment to build their portfolio. According to experts, investing in multiple cryptocurrencies will help you to lessen the risk of your investment since having one means the software will provide you with the market performance of your coins and includes analytical tools to help you handle your investments. Further, many cryptocurrency portfolio software have management systems that would provide you with real-time updates on the market value of each coin you have.
Why should you build your cryptocurrency portfolio?
New crypto traders believe that investing in one coin lowers their risk of losing what they invest, but actually, it’s quite the opposite; putting your money in one crypto would mean your crypto trade is all dependent on one coin’s market value, performance over time, and growth value potential which would consequently mean losing your investment all at once if the specific crypto you invest in crashes.
This is why you should have a cryptocurrency portfolio; rather than risking everything in one coin, break up what you plan to invest into smaller quantities and distribute it to another cryptocurrency. However, deciding what cryptocurrency to invest in is crucial when you decide to do this.
Why should you balance and diversify your cryptocurrency portfolio?
Do you know that there are more than 10,000 cryptocurrencies out in the digital financial market? Though it doesn’t mean that it is good to invest in all of them since 76% of the financial market is taken up by the top 5 cryptos, namely: Bitcoin (BTC) with a market cap of over $821 billion, Ethereum (ETH) with its market cap of over $353 billion, Tether (USDT) with the market cap of over $68 billion, Cardano (ADA) which market cap is over $67 billion, and lastly Binance Coin (BNB) with the market cap of over $64 billion. The thing you must see from the thousand types of crypto is the potential in them, the huge number of cryptocurrencies is proof that crypto is still continuing to develop and grow.
Someone who’s new to digital finance may just go and invest in Bitcoin trading. Investing in Bitcoin is a good start, but it does not mean you put all of your money into it. All types of crypto are volatile. The same is true with Bitcoin, which experiences extremes of high and low which indicates if its value drops, your investment drops; thus, having a crypto portfolio comes in very handy.
Adding other stable cryptocurrencies to your portfolio would mean that even if the price of bitcoin drops, you still have other cryptocurrencies to safeguard your investments which will mean you will not lose it all.
However, diversification does not mean spreading your investment just anywhere. Either go for the stable coins or do research and see which crypto has been stable and growing over the years; then, consider going for it. If you’re lucky, while doing so, there is a chance of you picking an outperformer, a coin you will not expect the price to go higher.
Since crypto’s potential is not set while building your portfolio, you should also consider potential market value—research which crypto project could have the potential to solve real-world problems. Take the Ethereum blockchain as an example; Ethereum is a platform that is not entirely dependent on crypto trades; rather, it offers a platform for developers to create decentralised applications which could be used for and are not limited to finance messaging and online voting. Another example is Chainlink’s goal to provide tamper-proof data from the off-chain sources to on-chain smart contracts, which could be a potential alternative that will take off one anytime soon.
Investing in cryptocurrency and building a portfolio still depends on you, your financial status and goals, as well as your risk tolerance. If you are really worried about volatility and want to play it safe, either go for stable coins which are backed by reserved assets like US Dollars and gold or invest in distributed small coins of smaller value, then go for larger investments once you get the hang of crypto trading.
