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How To Create a Cryptocurrency Portfolio?

How To Create a Cryptocurrency Portfolio?

By SimpleSwap | SimpleSwap Blog | 15 Aug 2023


The cryptocurrency market continues to expand and attracting new investors every day. The number of available cryptocurrencies increases too, sometimes it can be difficult to keep track of all the assets that are out there. Some tokens continue growing after the successful start, and some “burn out” and disappear. In order not to get confused by the variety of assets represented on the crypto market and continue to earn profit, an investor in 2023 needs to carefully approach the process of creating a cryptocurrency portfolio. Why is it needed and what is stored in it? Let’s find out in this new material.

What is a cryptocurrency portfolio?

A cryptocurrency portfolio is a set of crypto assets that an investor or trader keeps in his wallets. For instance, it might include Bitcoin (BTC), Ethereum (ETH), NFTs, stablecoins and DeFi assets.

Collecting a crypto portfolio isn’t a difficult task — you just need to invest in crypto assets. But there is a catch: in order to have a successful portfolio you need to choose coins and tokens wisely. It is important to correctly distribute your finance between crypto assets and clearly understand which projects you should invest in, and which one is better to leave alone.

Cryptocurrency portfolio is, first of all, an investor's assistant. Its main task is to help the entrepreneur get the maximum profit with minimal risk.

What to add in a cryptocurrency portfolio?

Diversification of your crypto portfolio might be a good idea — you never know for sure which asset might fly to the moon. For example, investors now are trying to add there;

  • leading cryptocurrencies (Bitcoin or Ethereum);
  • alternative crypto currencies (SOL, DOGE);
  • stablecoins (USDT, USDC).

An example of a diversified crypto portfolio:

  • Bitcoin - 50%
  • Stablecoins - 25%
  • NFT - 15%
  • Altcoins - 10%

Diversity will help not to lose profit in case of crisis, it is possible to continuously monitor up to 10-12 coins. You can buy cryptocurrency on crypto exchanges or marketplaces. Like Binance, Kraken or SimpleSwap. 

Crypto entrepreneurs often choose to store their assets in non-custodial wallets. This means that users are fully responsible for the safety of their funds and have full control over them, excluding third parties. The investor has the right not to transfer his private keys to anyone.

About asset allocation and diversification

Creating a cryptocurrency portfolio involves more than just buying crypto assets and putting them on the shelf “on demand”. It requires a deep analysis, development of strategies and the study of concepts such as asset allocation and diversification. Let's talk about these two in more detail.

The asset allocation factor directly affects the return on a portfolio. The main idea of this concept is that different assets respond differently to market changes. In order not to completely burn out and to continue making a profit, it is necessary to study the nuances of projects, and based on the information you found, fill your cryptocurrency portfolio with only what you need.

As we’ve already mentioned above, diversification is another key factor when it comes to creating a crypto portfolio. It helps to separate assets, and choose projects from different sectors of the Crypto World.

Basic asset allocation strategies

  • Strategic distribution

This strategy requires patience and perseverance from the investor. The work is carried out with long-term prospects, which means you should not expect instant profit. With such a strategy, a balance is maintained between risks and profitability. The distribution of assets within the portfolio does not change depending on the current picture in the market.

  • Dynamic Allocation

This way of investing is similar to the strategic distribution — it is also designed for long term investing. There is also a balance between risk and profit. But unlike the previous option, the distribution of assets will change under the influence of external market factors.

  • Tactical distribution

This is a more active way of doing business. An investor following this strategy will pay special attention to those financial instruments and sectors that have the greatest growth potential. The distribution of assets here is the most unstable and completely depends on the current situation on the market.

How to build the perfect cryptocurrency portfolio?

The crypto market is not flawless, it is full of risks and professional investors are well aware of this. They work with what is here and now. Good knowledge of the market, tracking the main trends, analyzing risks and prospects, developing new strategies, constantly monitoring cryptocurrency rates and world news helps investors collect the most profitable cryptocurrency portfolio for themselves at the moment.

It is recommended to rebalance from time to time and review the content of your crypto portfolio. Often, you might need to lose highly volatile and low-liquid assets, replacing them with some other options.

SimpleSwap also strongly recommends investors and entrepreneurs to conduct their own research as often as possible and renew the knowledge base. Relying on someone else's opinion is a dangerous and rather unprofitable strategy. The formation of your own investment instinct and entrepreneurial intuition is an extremely useful skill.

If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Hyperbitcoinization Explained” and “How To Get A Crypto Portfolio? A Beginner’s Manual”.

The easiest way to buy, sell or exchange coins is to use SimpleSwap services.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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