Importance of managing Crypto Portfolio

By Ishaan Goyal | CrypticWeirdos | 22 Aug 2021

Cryptocurrency portfolio

All sorts of coins and tokens that a user represents as a property comes under a cryptocurrency portfolio category. For example, if a user owns ten different assets, including Bitcoin, ETH, DOGE, USDT. etc., then the portfolio is composed of these assets. The worth of any portfolio depends on the market price of all kinds of cryptocurrencies.

During the beginning days of crypto trading, a user will have only a single asset in the portfolio, but as time passes by, the crypto portfolio becomes diverse. A cryptocurrency portfolio is full of digital assets. Investors tend to mix and diversify their currency and tokens for better results.  

Reason for having a diversified cryptocurrency portfolio

Managing a Cryptocurrency portfolio is essential because it will be productive in your journey towards financial freedom. It allows you to overview your investment outcomes and valuation of your current digital assets. Also, helps you to have a smoother exit whenever required and provide a more rational approach to investing and withdrawing. Crypto portfolio also enables you to track your previous investment and profit record and displays your success as a successful digital asset investor.

It is a common misconception that people focus on holding Bitcoins during the initial days of crypto-investment because it will make them a millionaire in the future. There is no doubt that Bitcoin is a good start but keep in mind that the crypto ecosystem is far more diverse than a mere Bitcoin. Let’s talk about the reasons for having a diversified cryptocurrency portfolio.

Diversity is key to success

Having a balanced crypto portfolio is having diversity by all means. It means that if a user keeps holding Bitcoin only, there are chances that he might face extreme ups and downs in crypto trading. The investor must have a diversified crypto portfolio, including many altcoins.

Work with eyes wide open in the crypto market

It is not always possible that whatever we think or predict about the future is always like that. There are chances that we might face the opposite situation according to our desires. So, having a diversified portfolio in crypto-trading and market helps us choose an asset facing extreme up in the future. A person always is prepared to take and use other coins and tokens when the need arises and always keep an eye on the projects to solve real-world problems.

Learn to re-balance the crypto portfolio

A diversified portfolio can be re-balanced for using more freedom. For example, let’s assume that a person has three types of assets, including Coin A in 25% proportion, Coin B in 25% proportion and Coin C in 50% proportion in the portfolio. A person can sell a portion of 5% from each pair of coins A and B to buy more Coin C. Coin C will become 60% in proportion. When the value of Coin C increases, 10% can be sold out to buy Coin A and B. In this way, the crypto-currency portfolio can be re-balanced again and again for out-performing results and gains.

Ways to effectively manage the crypto portfolio

A balanced crypto portfolio means you’re halfway to creating a sustainable portfolio to avoid any sort of hustle. 

It is good to take time to learn and analyze them fundamentally before diving headfirst into the water. If you are ready to build, here are five foundational pillars to help you strive toward that balance and manage your crypto portfolio. 

DCA method

DCA or Dollar-Cost Averaging is an automatically fixed dollar amount investment. It is perfect for the one who does have not a considerable amount to transfer in the crypto portfolio. In this way, they can make regular investments according to the income cash flow without worrying about crypto prices. These standard increments can prevent anxiety, which is expected due to wrong timings in cryptocurrency trading. Using the DCA method, a person can win a strong bull market when the prices of cryptocurrencies increase. In lower crypto prices, a person can still add more shares according to investment which remains fix.

Portfolio tracker

A cryptocurrency portfolio tracker enables the person to keep track of one’s investments. It allows the user to monitor the price change of different assets on their own. It is not easy to monitor investments and keep them organized, as users can have other assets in different wallets. So, using such a tracker, a crypto portfolio can be managed more efficiently and adequately.

Following crypto portfolio trackers can be used:

Selecting Crypto portfolio tracker

Crypto portfolio trackers come in different features, so choosing one is not difficult at all.

Step 1: In this step, determine all the convenience points that a tracker provides and look at what sort of problems a tracker will solve. Also, don’t forget the time spent while organizing the trades to determine the tax liability.

Step 2:  It is crucial to protect the coins as many crypto portfolio trackers are linked to crypto exchanges, so look into the safety and security of the app.

Step 3: Choose a tracker offering accessible trails. It will enable you to practice and will make you perfect in this work.

Step 4: Look for a crypto portfolio tracker having an intuitive design and a straightforward layout. It will help manage the crypto portfolio in a much easier way. A user will not have to spend a significant amount of time using the portfolio tracker.

Think about exit plan before any worse situation

A common saying is that there is an end to all good things, and nothing is here forever in this world. We should plan before the ending situations, which are temporary and won’t last long. An before entering a crypto market, it is essential to make a compelling investment, marketing and portfolio management strategy. Always think about the exit plan and work according to it. It will help create successful trade and help to book profits. Investors will feel good, happy, and motivated regarding their decisions. 

People often face incurring a loss when they don’t hold an exit strategy. It can have an investor in this position for an extended period. These situations can be detrimental in crypto portfolio management. They can hamper the investment strategies, too, so always think of an exit strategy before each step and before entering this market.

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