How to Get a Well-Diversified Cryptocurrency Portfolio Amid the Volatility of the Marketplace

Some vital lessons in portfolio management for crypto traders

The emergence of cryptocurrencies and the Blockchain has given us unusual opportunities in the world. The equality this technology has brought to the world financial market is unprecedented.

A man living in Mumbai or farthest reaches of Africa now has the same access to the financial market as someone in London or New York.The common factor between all these people is the Internet.

A major drawback of these opportunities created is that lots of digital currency projects keep popping up with great hopes, but keep falling short of expectations. There is also fraud, hacks and thefts because of the unregulated and decentralized nature of cryptocurrency.

Today, most people are more confused than before on joining the current cryptocurrency market. As popularly known, having no strategy for joining this market would be your worst strategy. Having a well-thought out and researched strategy will not only help you reap the Blockchain technology benefit, but much more. Failure is guaranteed if you keep changing strategies.

Most people have fooled themselves on their level of expertise because they made profit in their first try. But investing in cryptocurrency, which is a good thing can turn badly sour without a strategy for managing your portfolio.

The market is renowned for its volatility. Although volatility creates opportunity to get quick money, there is also the possibility of losing funds at the same rate.

You can choose from many strategies in dealing the crypto market. The charm is not in the strategy, it is your resilience to stick it out with your chosen strategy at all times.

5 Coin classes Needed for a Well-Diversified Portfolio

A Market Leader

Bitcoin is the worldwide leader in the crypto world. Apart from being the first cryptocurrency, it is also the biggest in market capitalization. With a maximum of 21 million units, 17 million of it is already in circulation.

We have added Bitcoin here because any major price change or run in the crypto market is determined with respect to it. Any other run is false without the Bitcoin.

You should hold between 30 to 60% of Bitcoin in your portfolio with this template. If any general adoption would happen with cryptocurrencies, it will start with the Bitcoin.

The Stable Coin

Tether is a stablecoin pegged to 1 Tether USD to 1 $1US. The company powering it claims every unit of the coin is backed by an equivalent US Dollar. So more coin is added when more US Dollar is pumped into the company.

It is included here because it can give you a much-needed edge over bear markets. The strategy is to keep as many as possible Tether in the Bull season, which is to be emptied to buy other coins cheaply during the dip periods.

The percentage in a well-diversified portfolio is dependent on the state of the market. During the bull run, you can keep up to 60% which should be lowered to about 15% in a dip. Although, it should never be empty. Other stable coins include Gemini Dollar, Dai, TrueUSD, etc.

A Passive Income Token

NEXO is a well-known project in the market because of its system. As a platform just like Ethereum, the fees for transactions are remitted in inter3est payments. NEXO operates a 2-coin system. The NEXO coin itself represents a stake in NEXO.

It is added here because it pays account holders for maintaining their NEXO holdings. In the long-term, the passive income it pays gives it a major advantage. You only need to have the coin to start getting paid in the coin.

You can make it about 5% of your portfolio if yours is a large one, but as high as 25% of your portfolio is advisable for anything lesser than 500 BTC.

A Trading Hedge

The Binance crypto exchange is an exchange token of the ERC-20. You can earn 25% discount on the acquisition fees of the BNB token is you trade on the platform. In addition, holding 500BNB or more can get you up to 40% referral bonus.

We have added an exchange coin in this template because it is not really affected like other cryptocurrencies. So far people continue to trade on the Binance exchange platform, the state of the coin will be determined by the trade above all else.

Generally, coins from exchange are not easily affected by popular cryptocurrency sentiment. Exchange coins were affected much less considerably than other cryptocurrencies except for stable coins in many researches made.

Therefore, an exchange coin is important as much as anything in your portfolio. If not for much, but your peace of mind. BNB is arguably the largest crypto exchange coin in trade volume. Although, exchange coins are a wise choice to have, they should not be more than 10-20% of your portfolio.

A Future Speculation

ICON is a Blockchain project with focus on interoperability of the Blockchain. It is projected that the Blockchain will be integrated in many things in decades to come. Hence, the need will arise to have a common ground for all the Blockchain networks to be created. Sounds more like centralization, but it’s still not. ICON is pushing to resolve this issue with its coin.

Well, you need to have a bit of uncertainty in your portfolio. And what better way than to go all out for the speculation. ICON has huge potential and could provide about 100% ROI.

Regardless, almost any promising coin could be used here. It all depends on your preference and belief in the project. Note that just 4-10% of your portfolio should be allocated for this coin category. Managing your risk exposure is prime.

In conclusion, what we’ve shown here is an idea of how to build a well-diversified portfolio. As said earlier, it is important to understand your strategy and stick with it.

You must be careful when categorizing your preferred coins under each property. A single coin can have more than on feature, but you need to show tact in making your choices. Because a wrong classification could cost you a lot in the long run.

Our portfolio template should make you well-equipped to create a secure, well-diversified portfolio that maximizes your profit and cancel out your losses.