Build A Balanced Crypto Portfolio: Expert Tips And Strategies (2024)

While investing in the cryptocurrency market, it is advisable to consider how you allocate your assets on your crypto portfolio to achieve balance. This will increase your crypto trading effectiveness in the end.

So what is a crypto portfolio? Let us take a look below.

What Is A Crypto Portfolio?

A crypto portfolio refers to a group of cryptocurrencies that an investor or a trader owns. The portfolio contains a mixture of these assets such as altcoins, major coins, and other crypto financial products. To measure the gains and losses that you are making, you can use spreadsheets, specialized tools as well and software to do so.

Allocation And Diversification Of Assets

Building a crypto portfolio involves selecting the tokens that you are interested in. This refers to asset allocation. While selecting the assets, you need to choose a variety of them to fully balance the gains and the losses. This refers to asset diversification.

For instance, in the stock market, you can choose to buy stocks from electric companies and agricultural companies. With regards to cryptocurrency, you can choose to invest in altcoins, Bitcoins, and stablecoins.

Difference Between Concentrated And Diversified Crypto Portfolios

A highly diversified portfolio is believed to help one balance the profits and losses in the cryptocurrency market. There is also a reduction in volatility. Depending on the coins you choose to invest in, you can end up making a large amount of profit in the end.

Many investors who own diversified cryptocurrency portfolios make fewer profits compared to those who own concentrated ones. If a token performs poorly, it can override the success of the one experiencing bullish conditions.

Diversification will also require you to research various tokens. If your tokens run on different blockchains, then it will be necessary to have a variety of wallets and exchange platforms to gain access to them.

Also Read: Telegram Trading Bots: What Are They And How Are They Used?

Types Of Cryptocurrencies

Payment coins

A few crypto tokens were designed to be used in the transfer of value. Examples include Bitcoin Cash (BCH), Ripple (XRP), and Litecoin (LTC). They were present before the invention of smart contracts and Ethereum (ETH).

Stablecoins

A stablecoin strives to keep track of an asset for instance a fiat currency. An example is the USDT which tries to maintain its value with the U.S. Dollar.

Having a stablecoin or stablecoins in your portfolio prevents it from being subjected to high volatility as the stablecoins always try to maintain their values. Moving tokens into a stablecoin that is pegged to the U.S. dollar such as the USDT is useful when you want to remove tokens from a project.

Security tokens

A security token can stand in for many things such as a bond issued by a project. The securities have been made available on the blockchain and have been digitized at the same time. As a result, they are influenced by local regulators. The regulators must run a legal check before issuing them.

Utility tokens

They serve as keys to a variety of services and products. You can also use them to cater for transaction fees when interacting with decentralized applications (Dapps). Examples of these tokens include ETH and BNB (Burn and Buy). The price of the token should be in connection with the utility value.

Governance tokens

If you own a governance token, you can take a vote on a project or get a portion of the revenue. Platforms like Uniswap and SushiSwap make use of these tokens. The price of a governance token should be in connection with the success of the underlying project.

Financial Crypto Products

Owning other crypto products is essential in the diversification of your portfolio. There are a variety of products you can choose to invest in available on blockchains and DApps.

Also Read: Cryptocurrency Safety Guide: 9 Methods to Identify Fake Cryptocurrencies

Creating An Effective Balanced Crypto Portfolio

Every investor will have their own opinion when it comes to building a balanced crypto portfolio. Let us take a look at a few principles worth following:

1. Divide your portfolio into parts that will accommodate high, medium, and low-risk investments. Higher-risk investments may also carry higher gains and more losses at the same time.
2. Do some research on stablecoins and include a few of them in your portfolio to provide liquidity for your portfolio.
3. Adjust your portfolio when necessary.
4. Invest your new capital tactfully to make sure you still gain from the tokens.
5. Research every token as it is your money on the line.
6. Risk money that you can afford to lose to avoid frustration and great losses.

Using Crypto Portfolio Trackers

A portfolio tracker is a program that has been designed to help you keep track of your crypto holdings. It helps you evaluate your performance and determine whether you are in line with your goals.

Examples of portfolio trackers include:

1. Coingecko: It tracks the cryptocurrency prices and has an inbuilt portfolio option.
2. CoinMarketCap: It requires you to put in your crypto holdings manually since it isn’t linked directly to your wallet. You can also check out your progress by keying in your buying prices for the tokens you have and check the progress.

Conclusion

Balancing your portfolios involves trying out various strategies that will help your asset allocation and diversification to thrive. Diversification is important to help you balance your profits and losses.