This guide offers tips on how to diversify Crypto Portfolio?
Table of contents
- What is a Crypto Portfolio ?
- Need for diversifying your Crypto Portfolio ?
- Requirement Creating a Well-balanced Crypto Portfolio
- How to Diversify your Crypto Portfolio ?
- Diversify by Coin Type
- Pros and Cons of Diversifying a Portfolio
- Rebalancing Your Crypto Portfolio
- Why You will need a Crypto Portfolio Tracker ?
- Features of Crypto Portfolio
- How much Crypto should you own ?
- Crypto Investment Strategies
- 5 Steps to Building a Solid Crypto Portfolio
- Concentrated VS Diversified Crypto Portfolios.
- 7 Best Cryptocurrency Portfolio Trackers – 2023
- Crypto Portfolio Trackers
What is a Crypto Portfolio ?
Firstly, a crypto portfolio refers to all the digital assets you own in an exchange account as well as in a crypto wallet.
Further, these can include fungible crypto tokens like Bitcoin (BTC) and NFT’s (non-fungible tokens) .
As well as , Metaverse land, CryptoPunks ,o r NBA Top Short clips.
Need for diversifying your Crypto Portfolio ?
Firstly,millions of people are looking at cryptocurrency as an investment opportunity . Especially, now as market is bullish .
Secondly, holding a range of virtual assets can help protect your investment against price corrections. Especially, affecting individual coins or tokens.
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Requirement Creating a Well-balanced Crypto Portfolio
Firstly , creating a well-balanced crypto portfolio generally requires that you stick to the basic principles of asset allocation and diversification.
That is, the same rules that apply to building a traditional portfolio are still at play when creating a crypto investment portfolio . Perhaps the most important factor is diversification simply put .
Secondly , by investing in different types of crypto, you can set an asset allocation that reflects the amount of risk you’re comfortable with .
Most importantly , any investor interested in building the best crypto portfolio for themselves would be wise to remember that even as crypto usage becomes more popular, it is still a very volatile and risky investment.
Essentially , this fact should remain top-of-mind as you create a balanced crypto portfolio .
Because unlike a traditional investment portfolio a crypto portfolio contains a single asset class that has a higher overall risk profile as well as , the potential gains you’re hoping to achieve to reach your financial goals.
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How to Diversify your Crypto Portfolio ?
First, a good way to start diversifying your portfolio is by allocating money toward various coin types.
Second, a number of crypto types are available in today’s market.
Essentially, the most common options include peer-to-peer (P2P) payment coins. As well as , smart contract coins and stablecoins.
Diversify by Coin Type
P2P – Most importantly, Cryptocurrencies allow for people to transact without the need for a centralized intermediary like a bank.
Secondly, P2P transactions are one of the essential use cases for crypto.
Smart Contract Coins – Firstly, Coins that power smart contract platforms like Ethereum , have gained a lot of traction recently.
Further, Smart contracts are simple agreements , executed by the code. Furthermore, it allows for automated transactions between anonymous parties.
Moreover, the networks that use them, offer developers a platform to build decentralized applications. Further, they are more commonly called dApps.
Secondly, an example of a popular dApp built on Ethereum network is UniSwap, a decentralized exchange . Further, it is used for swapping tokens that use Ethereum ERC – 20 standard.
Stablecoins – Firstly, in a class of their own , stablecoins , like True USD (TUSD) , are often pegged to the value of existing currencies.
Further, stablecoins help in shieling holders from crypto market volatility.
Additionally, the price of stablecoin may also be tied to precious metals or even oil reserves.
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Pros and Cons of Diversifying a Portfolio
• Pros: Firstly , the pros to diversification are clear: It can potentially decrease risk, and thus, increase potential returns.
Further , there’s no guarantee, of course, but if you’re a risk-averse investor, reducing risk may be a top-of-mind concern.
Furthermore , diversification can also give investors leeway to explore new investment opportunities by limiting their exposure and risk.
• Cons: Chiefly the drawbacks of diversification are that it can limit your gains.
Since a good percentage of your portfolio may be invested in relatively low-risk assets, it’s possible to miss out on big market gains to put simply .
Additionally , if you had been invested in other assets , diversification is also a process and a chore, and you may incur fees for making numerous trades and rebalances.
Rebalancing Your Crypto Portfolio
Firstly rebalancing is an important aspect of crypto portfolio management .
Secondly, the process by which an investor returns their portfolio to its target allocation is known as rebalancing.
Additionally, to rebalance the crypto portfolio , an investor or trader has to purchase or sell crypto assets. Basically, to achieve the desired portfolio composition.
Especially, because of the different returns of the asset classes, the original mix of assets will inevitably change as asset value changes.
Basically, this will alter your portfolio’s risk profile. For example, if the value of a few of your smaller investments rises , you may need to exchange some of them for larger cryptos.
Additionally, it will help you to maintain your desired asset allocation .
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Why You will need a Crypto Portfolio Tracker ?
Firstly, as you will add assets to your portfolio, especially, those of the fast-changing variety like crypto.
Additionally, you will need more time to spend on crypto asset management . That’s why you can find a tool that will do it for you.
Secondly, a cryptocurrency portfolio tracker is a tool.
Further , it enables you to easily monitor the performance of your cryptocurrencies .
Additionally, whatever other assets you have in view.
Most importantly, it is imperative that you pursue portfolio diversification to build a selection of assets .
Furthermore, assets which are consistently well-balanced and well diversified.
Features of Crypto Portfolio
Firstly, the biggest problem in the crypto portfolio tracking world today is that there are just too many of these tools on the market.
Basically, all of them are vying for your attention without making it easy to choose between them .
a. Integration with a Range of Financial Institutions
Firstly, Crypto portfolio trackers work by connecting with third party aggregator APIs.
Additionally, it enable them to tie into different crypto data feeds . Especially, to display the info you need to track your assets.
Caution – The thing is, most aggregators only work in certain countries . Basically, these aggregators have few technologies to work with certain crypto feeds.
Secondly, it means that not every cryptocurrency portfolio tracker will work in every situation .
Further, you need to be sure to test the tools you are interested in .
b. High Level of Security
Firstly, Cryptocurrency is a digital money that is managed by a decentralized network called “blockchain” .
Secondly , this network is not owned , regulated or tracked by any specific authority or institution.
Lastly, this of course , means that crypto ownership is hard to track.
How much Crypto should you own ?
Most experts agree that cryptos should make up no more than 5% of your portfolio.
Especially, this small amount is “small enough” to keep an investor comfortable in periods of high volatility .
Additionally, it is also large enough to have a truly positive impact on the portfolio if crypto prices rise.
Basically, adding small amount can add some to your portfolio can be a great way to really take advantage of long-term gains .
Ultimately, you will have a safety in knowing that if you do not make it big , you are not of your whole investment portfolio.
Firstly, directly owning crypto is no longer your only option for investing in the space. There is a variety of Bitcoin ETFs and blockchain ETF’s.
Secondly. it provides a simple way to get crypto exposure in your portfolio.
BITW – Bitwise 10 Crypto Index Fund , a market cap-weighted ETF of 10 largest digital assets.
Furthermore, being market-cap weighted means Bitcoin and Ethereum make up the bulk of the fund at more than 90% of the total portfolio.
Especially, passive crypto investors would be best suited to focus on Bitcoin , Ethereum and/or/a crypto index fund.
Simply, single name blockchains and projects ,even the larger ones , still have a lot of tail risk and on a risk-adjusted basis.
Similarly, it is hard to outperform Bitcoin, Ethereum , or an index unless you are an active researcher in the space.
Firstly , these are cryptocurrencies that are generally less volatile than most.
They’re generally pegged to fiat currencies (as mentioned), which keeps their values relatively flat.
Whereas Bitcoin or other cryptos can see wild price fluctuations, stablecoins may help buoy a portfolio’s value when the markets go wild simply put .
Further , adding some Altcoins to your portfolio , which, again, are any tokens or coins other than Bitcoin , are another relatively easy way to diversify your holdings.
Majorly , while Bitcoin is and remains the major player in the crypto space, there are new altcoins springing up almost every day, giving investors a litany of choices.
Chiefly , NFTs, are not cryptocurrencies in and of themselves. But they do exist in the crypto space, and function as a sort of proof of ownership over a certain asset . Consequently , most people probably associate them with digital artwork.
But NFT’s can represent just about anything ( music NFTs ,are an example), and can carry value.
Further , that value can be used as a tool to diversify a crypto portfolio. NFTs are very new and carry a very high degree of risk.
Chiefly , “Zombie currencies” refer to cryptos that see no or barely any trading activity.
Further, it means that they are functionally dead, but still floating around on the markets. to put simply .
Secondly , there are thousands of them out there.
And then , while that may not suit an investor’s appetite, there’s always the chance that some of these zombie currencies could spring back to life at some point and appreciate in value simply put .
That said, adding these to your portfolio would incur some serious risk.
Chiefly , Platform cryptos are the native cryptocurrencies to digital exchanges and platforms.
For example, if SoFi had a native platform crypto, it could be called SoFi Coin, or something similar.
These tokens are generally used to facilitate transactions on their respective networks.
Additionally , while they may not have the same utility or broad appeal as, say, Bitcoin, they can be used as a diversification tool in a portfolio.
firstly , Protocol coins are tokens used to access services provided by certain crypto protocols.
Further , without getting too deep in the weeds, you should know that there are certain protocols built on top of blockchain networks.
Additionally , these protocol coins can grant owners access to those layers of the networks.
Again, adding some of these to your portfolio could help diversify it.
First , by far Bitcoin is the largest cryptocurrency with a market cap of nearly $370 billion .
And then , it is still the most well-known cryptocurrency. Bitcoin established the use of blockchain technology.
Chiefly , a decentralized public ledger that contains a digital record of every Bitcoin transaction.
Further , Bitcoin also pioneered the basic system of cryptography and consensus (or peer-to-peer) verification .
Simply , which is the foundation of most forms of crypto today.
Chiefly , with a market cap of roughly $160 billion . Additionally , Ethereum is another blockchain network .
Further , it’s known as a programmable blockchain, which allows for the building of decentralized applications . And the creation of smart contracts.
Furthermore , its currency is known as Ether (ETH), which is the main form of exchange on the Ethereum platform.
But unlike Bitcoin, there is no limit to the number of ETHs that can be created to put simply .
Firstly , Cardano was created in 2017 by Jeremy Wood and Charles Hoskinson; Chiefly , Hoskinson co-founded Ethereum so it makes sense that Cardano and Ethereum have similarities.
Further , similar to Ethereum, developers are able to make use of the Cardano Blockchain . to write smart contracts and decentralized applications (dApps) to put simply .
Additionally, Cardano boasts a library of academic research that its founders point to as a factor that makes the blockchain unique.
Further , Cardano’s creators also hope that the platform will be used by “innovators and visionaries” to create positive change in the world.
Moreover , Cardano’s cryptocurrency is called ADA, after Ada Lovelace, a 19th-century mathematician, and has a market cap of more than $12 billion.
Chiefly , Dogecoin (pronounced dohj-coin), with its playful Shiba Inu icon, was launched in 2013 as a way to poke fun at Bitcoin.
Further , the currency has captured people’s attention and a fair amount of investment . And then , now has a market cap of almost $8 billion.
Most importantly , the number of Dogecoins that can be mined are unlimited (versus the 21 million-coin cap on Bitcoin).
Firstly , Litecoin isn’t among the top ten largest cryptocurrencies by market cap . But it is still a relatively popular one.
Secondly , it was created in 2011 through a soft fork in the bitcoin Blockchain . And thus was one of the first Bitcoin spinoffs, or “altcoins.”
Additionally , the value of Litecoin is generally correlated to Bitcoin’s price movements. Especially , rising when Bitcoin rallies and falling when Bitcoin declines.
Further , due to Litecoins faster transaction speeds and lower fees, some merchants, vendors, as well as , blockchain applications have introduced Litecoin payment processors.
Litecoin has a market cap of about $3.5 billion.
Crypto Investment Strategies
Just like there are strategies for investing in stocks or other assets, you can create and stick to various crypto investment strategies, too. Here are some of the more familiar to investors in the crypto space:
Firstly ,iIf you’re familiar with a buy and hold investment strategy , popularized by none other than Warren Buffett, you can apply the same logic to a crypto portfolio.
Additionally , the strategy is easy to stick to: You simply invest in the cryptos you want to invest in, and do nothing. You hold them to put simply .
Mainly , the idea is that they will appreciate over time, earning you relatively stress-free returns down the road.
Chiefly , you don’t need a hoe or a plow, so fear not! yield farming in crypto basically means that investors lend their crypto holdings to exchanges or platforms in exchange for additional crypto.
Chiefly , it’s similar to lending money and earning interest. So, to yield farm, you’d simply lock up your assets in a liquidity pool, and earn a percentage of transaction fees, interest payments, or governance tokens in exchange.
firstly , Depositing, in this sense, is similar to stashing your crypto holdings in a savings account and accruing interest.
Additionally, you can lock up your assets (similar to yield farming) and stake your crypto . Further which can earn you additional rewards . As well as , help you grow your holdings while doing almost nothing at all.
Finally, you can always get involved in crypto trading and try to earn returns that way. This is risky, however, especially in the crypto markets, where prices fluctuate in much wilder swings than they generally do in the stock markets.
But certainly , there are crypto traders out there who make a profit. Just be sure you’re well aware of the risks before trying to make any money through crypto trading.
5 Steps to Building a Solid Crypto Portfolio
If you’re ready to build your crypto portfolio from the ground up, it can be a relatively easy process. Here are five steps you can follow to get your portfolio up and running:
1. Keep tabs on current crypto values
Obviously , you’ve heard before, but it’s worth repeating that crypto values are very volatile.
And then , in 2022, investors experienced a big drop in the market, with almost every crypto seeing a significant loss in value.
Again , this is why it’s important to keep tabs on where the market’s at, and to try and develop a sense of your risk tolerance.
Further , there are numerous websites out there with data related to the markets, updated by the second.
Further , search the internet, find a site or two that you like or find useful, and start to keep tabs on what tokens appear promising . And which you might be interested in adding to your portfolio
2. Read the Research
Mainly , some crypto platforms publish white papers or other research reports, like the Bitcoin white paper published in 2008 that jump started the crypto revolution.
Furthermore , these reports often explain how a cryptocurrency works, what it’s designed to do, and a roadmap for the currency to put simply .
Additionally , if you’re serious about investing in a specific crypto project or token, it’s probably worth your time to do some homework and read its corresponding white paper.
Further , you’ll get a sense of what’s ahead for the project, which may help you decide whether or not you want to add it to your portfolio.
Moreover , Stocks are different as companies publish financial data and have a history to dig into , but that’s not an option with cryptocurrency simply put .
So, if you get the chance, try to read as well as , absorb as much information as you can.
Concentrated VS Diversified Crypto Portfolios.
First of all, there are two types of crypto portfolio allocations , concentrated and diversified.
Firstly, a concentrated crypto portfolio is when you invest in either one or a handful of cryptocurrencies of the same sector.
Secondly , let’s say your crypto portfolio only has Bitcoin , so now your entire crypto portfolio is dependent on a single cryptocurrency.
Moreover , if Bitcoin drops by 50% , half of your portfolio wiped out.
Basically, a well-diversified crypto portfolio consists of crypto assets across different sectors.
7 Best Cryptocurrency Portfolio Trackers – 2023
a. Quick look
c. Coin Ledger
g. Crypto Pro
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Crypto Portfolio Trackers
1. Best Portfolio Tracker : CoinStats
Firstly, boasting over one million users ConStats is one of the easiest ways to track your cryptos within one single dashboard.
Simply, whether you are trading on centralized exchanges like Binance or DeFi protocols like UniSwap .
CoinStats can help you track your assets across all of your wallets.
a. Free portfolio tracking
b. Use CoinStats wallet
c. Tax Reporting
2. Coin Ledger
Firstly, this platform is user – friendly , and customers love the intuitive dashboard.
Exchange & blockchain integrations
Calculate your crypto taxes automatically
Identify tax loss harvesting opportunities
Delta.app is one of the most popular portfolio trackers today.
Especially, started in October 2017, Nicholas Van Hoorde , the founder and CEO , launched the company.
Basically, with a mission of building an intuitive cryptocurrency portfolio tracking app.
Additionally, Delta has hundreds of thousands of users around the world. Further, it is often looked to as the best portfolio tracker for crypto.
a. Complete Portfolio Manager
b. Exchange and Wallet support
c. Market Overview and Watchlists
d. Detailed Trade Analysis
Firstly, CryptoCompare is not just a portfolio tracker but really more of an entire ecosystem for cryptocurrency.
Secondly, the company offers data as a service, content, and educational guides.
As well as, a price aggregator for top cryptos and top exchanges.
In addition to, it is a completely cloud based , it is free to sign up , as well as , it has an iOS and Android version.
a.5,000 + Coins Tracking
CoinMarketCap is one of the world’s most-trusted cryptocurrency price trackers.
Firstly, though the platform is limited in its functionality, it can be a good option for traders on a budget.
Additionally, it is good for who prefer to manually enter their cryptocurrency holdings.
a. Manual entry
c. Mobile app
6. Crypto Pro
further , Crypto Pro launched back in 2015 as a Bitcoin ticker for the initial Apple Watch Users.
Additionally, who would be able to view Bitcoin’s price on the go. In the form of complications on different watch faces.
Secondly, the app tracks over, 5000 cryptos . Also, it is available on the entire Apple ecosystem.
Additionally, users can also track their portfolios , read the news and set price alerts.
a. Portfolio Tracking
b. Apple Ecosystem Support
c. Live Price Updates
d. Complete Privacy
Firstly , Kubera is a portfolio tracker designed for multiple assets. Additionally, it includes cryptos and NFTs .
Secondly Kubera does not include a free option . Personal plans start at $150 a year.
a.Track multiple assets
b. Automatic and manual import options
c. Find your highest-performers
8. Coin Ledger
Firstly, not only, a Coin Ledger is not just a portfolio tracker. Further it is one of the highest rated cryptocurrency tax platforms on the market.
Additionally, over 300,000 cryptocurrency traders and investors use Coin Ledger to track their digital assets .
Secondly, it not only generates comprehensive tax reports but also capital gains and losses in minutes.
Best for investors looking to save money on taxes : Ledger
Good for investors looking for detailed trade insights : Delta
Great for investors looking for detailed market analysis : CryptoCompare
Suitable for investors looking for manual trade entry : CoinMarketCap
Excellent ,for investors looking for iPhone and Apple Watch functionality : Crypto Pro
Investors who are looking to track all their assets in one place : Kubera
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Firstly, however, you choose to invest, diversifying across crypto assets can help protect your portfolio into the future.
Secondly, looking into the various types of cryptocurrencies , you can use their track records as well as, industries as a guide toward a diversification strategy.
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It involves investing in assets that are not related to the main blockchain networks.
It is a means to manage your inventory of online currency investments. It can be hosted on a crypto management software that helps you track each coin’s performance and provides you with analytical tools.
With this strategy investors need to allocate at least 12 months worth of their monthly expenses in a liquid fund which can thus be easily liquidated in times of emergencies. Allocate 20% of the overall portfolio to Gold to provide downside protection during uncertain times. And dedicate 80% of the total investable.
Basically it is a tool or application that helps their crypto assets. They provide real-time data on current market.
Recommended is investing 5% or less of your investable assets in crypto.
Switzerland is one of the most crypto friendly countries.