There are two ways you can approach crypto investment: Educate yourself and plan your trades accordingly or jump into random trades based on hype. The second approach is a recipe for disaster, especially in the bear market that we are in. If you have been following the second approach, chances are that you already know what getting rekt feels like. But the good thing is, you can always start again. If you are a new trader, it is unexplored territory, but if you are here after losing money due to a lack of education, you have your mistakes as lessons. In both cases, you need to build your crypto portfolio from scratch.
We are going through a prolonged bear market. Investors have lost more than $2 trillion over the last 8 months. The prices of Bitcoin and Ethereum are down almost 70% from peaks. Therefore, learning portfolio management is extremely important in the present scenario. If you want to get returns from your investments, you need to manage your profits and losses accordingly. Risks and rewards and inherent to crypto investment. Therefore, one who manages both effectively stays in profit. Building a crypto portfolio is essentially the art of diversifying your investments into different cryptocurrencies and managing profits and losses.
What Is A Crypto Portfolio?
A crypto portfolio is a way to track and manage your investments in different tokens. There are several apps and platforms that offer portfolio management services. Having a portfolio makes it easy to balance profits and losses to maximize the gains.
How To Build A Crypto Portfolio?
- Learn The Basics: Be it an investment or portfolio management, learning the basics is always the first step. You must develop a sound understanding of the crypto industry. Crypto is a high-risk, high-reward sector. Exponential gains and sudden crashes are a part of the game. Therefore, educating yourself about the fundamentals is the first step if you want to build your crypto portfolio.
- Diversify Your Investment: Crypto is an ocean of opportunities with several trends emerging rapidly. As a smart investor, you need to diversify the allocation of funds across different tokens. Diversification helps you offset your losses with profits. There are different types of cryptocurrencies, such as utility tokens, securities, and governance tokens. Consider diversifying your investments into different crypto tokens. It is a standard practice to build a stable crypto portfolio from scratch.
- Split Your Portfolio Depending On Risk: Risk management is integral to portfolio management. A portfolio containing only high-risk coins is more likely to end up in loss. Your portfolio should comprise high-risk, low-risk, and medium-risk tokens to create a balance. This prevents you from getting rekt while leaving the door open for exponential growth. You must have large-cap and well as small-cap tokens in your portfolio. At least 30% of your portfolio must be low-risk cryptos like Bitcoin and Ethereum. That’s how you build a crypto portfolio.
- Always Hold Some Stablecoins: Stablecoins are pegged to FIATs like USD and EURO. Holding stablecoins like $USDT and $USDC provides liquidity for your portfolio. Moreover, with stablecoins in the inventory, you can easily enter quick traders for instant profits. A dip is always around the corner, and you must have enough fuel to make the most of the next up-cycle.
- Using An App To Manage Your Portfolio: Managing a portfolio manually can be tricky. From creating a watchlist to tracking performance, you need to dedicate time and effort to different tasks. An easy alternative to this is using a professional portfolio management app. A portfolio management app allows you to track and manage your portfolio seamlessly. Everything is available on a single app. All you have to do is add the tokens you have invested in, to the app.
Conclusion
Large-cap coins like Bitcoin and Ethereum still dominate the crypto market. The price movement of these tokens impacts the overall market. However, there are instances when some tokens break free from this setup. This is why you should have a close watch on all the cryptocurrencies you have invested in. When you build a crypto portfolio, you can easily track price movements and manage risk. Having a portfolio management app makes life easier by streamlining the entire process. There is no thumb rule to building a portfolio. But you can achieve success by emulating the practices followed by seasoned investors.