Cryptocurrency Portfolio Diversification

Portfolio Diversification Explained For Beginners - How To Invest $1000 in Crypto?

You want to start investing in cryptocurrency and make up a nice portfolio but you have no idea how to do it? Well, in this case, here is the right post for you. Let me give you some practical advice on how to set up a diversified portfolio. In the end, I will give you an example of how I would set up a new cryptocurrency portfolio with $1000.

Why Diversification?

You may ask yourself why you should diversify your portfolio. look, the thing is that when you diversify your portfolio, you will drastically lower the risk of losing everything. The reality is, that there not only massive gains but also brutal drops in the crypto space, especially when a coin is over-hyped or a project misses some technical deadlines, massive drops are happening. Be smart and diversify your portfolio to lower the risks.

In this post, I am only focusing on a cryptocurrency portfolio. However, your cryptocurrency portfolio can also be part of a bigger investment portfolio that also contains stocks and gold. 

Quality Over Quantity

My credo is "Quality over Quantity". I don`t chase every pump out there in order to protect my capital. I only focus on a few selected quality assets and not hundreds. There are many new exciting cryptocurrencies coming to the market every day but chasing all of them can be extremely dangerous to your portfolio. It`s important to be cool when investing in crypto and not to FOMO!

Another thing is that it is getting harder and harder to keep track of all the different projects, the more different coins you are adding to your portfolio. It is better to have a handful of quality coins that you are able to keep track of.

Making Up A Portfolio with $1000

Now let me give you a concrete example of how I would set up a new cryptocurrency portfolio with $1000, knowing what I know today. I consider this portfolio a low-risk portfolio in a high-risk market, focusing on cryptocurrencies that have already proven themselves.

Bitcoin $350

The cornerstone of the new portfolio would be Bitcoin and I believe that Bitcoin should be the cornerstone of every portfolio. It is the oldest, most popular, and most secure blockchain. Bitcoin is considered to be digital gold and Bitcoin is where most of the smart money goes in. For this reason, Bitcoin is the cornerstone of my portfolio and I`ll put $350 into Bitcoin, that`s 35%.

Ethereum $200

The next cryptocurrency that I would add is Ethereum, the second-biggest cryptocurrency. Let`s put $200 of Ethereum into our portfolio. Most of the popular tokens are ERC20 tokens like the ones we can earn here on Publish0x. All these popular ERC20 tokens are built on top of the Ethereum blockchain.

Binance Coin $100

I would put another $100 into a cryptocurrency that I can use for trading like a stablecoin. With that amount of crypto, I can buy dips quickly when they happen. I have decided to put $100 into Binance Coin. I can use it on Binance as a very popular trading pair and when I don`t need it for trading, I can use my $BNB to farm some new tokens on the Binance launchpad. The farming rates can be pretty lucrative. That`s why I think, that it is a smart move to have 10% of our portfolio in $BNB. 

Chainlink, Loopring, Yearn Finance $150

These three tokens added to our portfolio are basically a bet on Decentralized Finance that is taking place on the Ethereum blockchain. Let`s invest $50 in each of them.

The first DeFi token is Chainlink, the most popular oracle. The thing is that blockchains don’t have access to information that is not on-chain. When it comes to Decentralized Finance this typically means price data that is used by smart contracts to control key aspects of their lending protocols. Oracles are critical to the success of all DeFi applications because all Decentralized Finance applications need price feeds on token swap and loan collateralization process. This urgent need in DeFi is exactly what makes oracles like Chainlink so precious.

I would also add a token from a Decentralized Exchange (DEX) like Loopring, UNI, or Kyber to our portfolio. Decentralization is on the verge of becoming a major market for crypto investors and traders. Decentralized projects are the ones that I believe stand to make significant gains and provide very interesting passive income opportunities to savvy investors over the coming years. That`s why at least one DEX token is a must-have in our portfolio.

When it comes to Decentralized finance, there are also lending platforms like Compound or Yearn Finance. Let`s also add one of these decentralized lending platforms to our portfolio and we have placed our bet on Decentralized Finance that is taking place on the Ethereum blockchain. A huge advantage of Compound is that we can add it for free by earning up to $59 in $COMP on Coinbase Earn. That`s a smart move.

Polkadot Ecosystem $100

Now let`s see what is happening outside of the Ethereum blockchain, I mean there is so much more than just Bitcoin, Ethereum, and ERC20 tokens.

Let`s face it, decentralization is not only happening on the Ethereum blockchain. A huge part of decentralization is taking place outside the Ethereum blockchain, for example in the still quite young Polkadot ecosystem.

Polkadot is actually one of the hottest things happening in the crypto market right now. Some even say that it is the most important cryptocurrency since Ethereum. For this reason, I would put another $100 into Polkadot.

Polkadot was designed to resolve the scalability and interoperability issue that can be observed on the Ethereum blockchain right now. The interoperability with other blockchains is the main focus of Polkadot.

Investing in Polkadot itself is one good option but it is also worth it to think about investing in different projects that are running on the Polkadot blockchain. In case you`ve missed it, you can still check out my post TOP 3 DeFi Altcoins Powered By Polkadot 🚀

KAVA $50 

My next choice for our portfolio would be Kava. Kava is basically a multi-chain Maker DAO. It offers to give collateralized decentralized loans with stable coins to users of major crypto assets like Bitcoin, Ripple, Cosmos, BNB, and others.

Kava is actually about to break open the world of multi-chain decentralized finance as Kava`s lending platform is compatible with several crypto assets. The first two chains for Kava are Cosmos and Binance. For this reason, let`s put $50 (5%) into $KAVA.

Ampleforth $50

Cryptocurrencies are extremely volatile. Ampleforth aims to take the volatility out of it. You can think of Ampleforth as a fluid economic system where the focus is on keeping the user’s spending power stable. Let`s put another $50 (5%) into $AMPL. We can use it to receive continuous drips of crypto from its geysers. Remember that we are looking for ways of diversifying your portfolio and we want it to be a low-risk portfolio in a high-risk market. That`s why I believe that $AMPL with its unique features is the right choice for our portfolio.

My Final Words

Now you can go and buy all the cryptocurrencies that I have mentioned in this post.🤓 

Now honestly, this is absolutely NOT the intention of my post. My intention is also NOT to replace your own research. I may look smart on my profile pic but I am not your financial sensei. 🤓  However, my post really reflects my own opinion.

The intention of my post is just to help you when you are going to set up YOUR OWN crypto portfolio by sharing my thoughts on this topic with you and by giving you a concrete example. There are a lot of great coins out there and even more shitcoins. If I forgot to mention your favorite cryptocurrency then please don`t be mad at me. These are just some examples to give you an idea of planning a crypto portfolio.

So, I hope I could provide you with some interesting and useful information. If that`s the kind of stuff that you like to read on Publish0x, make sure to hit that follow button. Thank you guys as always for reading, liking, following, and tipping 👍  See you next time.

Of course, I am also interested in your diversification strategy for your portfolio, do you have any? It would be awesome if you would let me know in the comments.

If you like, you can also follow me on Twitter.

You may also like: Sell The News And Buy The Dip 😎 Cryptonator`s Ultimate Crypto Investment Guide

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