Building A Crypto Portfolio And Making Profit
There are many options when investing in cryptocurrency. One of the most popular options is to have a crypto portfolio with various assets. But before you decide to create a cryptocurrency portfolio, make sure you understand what it is and how to profit from it.
Start by taking the time to understand the basics of a crypto portfolio.
Coinbase Is Buying $500 Million In Crypto And Investing Future Profits Into A Crypto Portfolio
- CEO Brian Armstrong said he hopes to operate more of the company’s operations using crypto, though it’s mixed today.
- The company plans to invest in “Ethereum, Proof of Stake assets, DeFi tokens, and many other crypto assets supported for trading on our platform,” finance chief Alesia Haas said in a blog post.
In this article
Coinbase will buy $500 million in crypto on its balance sheet and allocate 10% of its quarterly profits into a crypto assets portfolio, company executives announced late Thursday.
The company plans to invest in “Ethereum, Proof of Stake assets, DeFi tokens, and many other crypto assets supported for trading on our platform,” becoming the first public company to do so, finance chief Alesia Haas said in a blog post.
CEO Brian Armstrong first revealed the brokerage’s plans in an earlier tweet, saying he expects the allocation to grow as the market matures. He also indicated the company’s ambitions to diversify its crypto services and operations, which mostly center around trading.
“Hopefully over time we can operate more of our business in crypto,” Armstrong. “Today it is still a mix.”
A Wide Range Of Available Coins And Exchanges
A portfolio tracker should be a one-stop shop for all of your coins. Look for a cryptocurrency portfolio tracker that offers connectivity with all of the coins and all the exchanges youre on.
If you search for a combination tracker and exchange, take a look at the platforms coin offerings before you decide to sign up for an account. This will allow you to trade all of the coins you want without working with multiple exchanges and memorizing passwords.
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When To Take Profit
One of the most challenging questions about crypto portfolios is when to take profits. You do not want to sell and take your profit too soon, only to see the price of the crypto skyrocket, as this is lost potential profits. At the same time, you dont want to keep the crypto in hopes it will continue to rise, only for it to fall and lose your money. The best traders can find a perfect balance between the two.
You will have to familiarize yourself with the market and do some technical analysis to figure out when to take profit for each cryptocurrency. Be sure to stick to analysis and avoid emotional trading.
Best For A Unified Experience: Cryptocom
Along with the ability to track your cryptocurrency portfolio from the Crypto.com app, the platform lets you buy, sell and earn interest on your digital assets. Also, the trading platform offers lower fees than many of its competitors, making it a great option for cost-conscious investors.
Crypto.com also has a cryptocurrency debit card you can use to earn crypto-back on your purchases. Depending on the debit card you choose, you can earn anywhere from 1% to 8% back on every purchase made with the card. Top tier cards, however, require you to stake CRO tokens on crypto.com. Regardless, Crypto.com is a great all-in-one platform to trade, track your portfolio and earn cryptocurrency on your day-to-day purchases.
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Keep The Trading Fees Low
if you take an active trading approach to invest, then it is expected that transaction fees will trim your profits, especially when trading on margin with leverage.
With a long-term investment strategy, after allocating the cryptocurrencies, all you have to do is just HODL. Aside from the initial transaction fees, you are not expected to see any more payments down the line.
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These cryptocurrencies have the highest risk but the highest potential reward. Any crypto with a can be considered a low/micro-cap crypto. There are no two ways about it these are highly speculative investments that carry the off-chance of bringing those 100-1000X gains that crypto is known for.
If youre punting on a crypto that has nothing behind it besides a lot of hype, prepare for a wild ride. And to lose your investment While some have success with low/micro-cap gems, most of these projects never make it off the ground. Outside of huge bull runs, they are a long-shot that may produce massive gains.
The 80/20 rule
Having a roughly 80/20 blend of large-cap /mid & low-cap coins is a good rule to follow if you are new to crypto investing. With a portfolio diversified like this you should be able to make sizable profits from any sudden surge in the small to mid-cap cryptos, whilst also having a large part of your investments in stabler coins. This will also help minimise any liquidity issues in your portfolio .
According to the 80/20 rule, 80 percent of your portfolio should be in the largest, most established cryptocurrencies like Bitcoin, Ethereum .
Note: All portfolio examples are suggestions only, and the 80/20 rule can come in many variations and may in practice look like: 60/20/5/5/5/5, 30/20/10/10/10/5/5/2/2/2/2/1/1, or 60/10/10/10/10. Always do your own research before investing.
80/20 portfolio examples
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Model #: The Conservative Portfolio
This portfolio is designed for someone who is interested in investing and wants to setup a more complex portfolio, but at the same time needs to be more cautious on the risk front. This portfolio would be a smart choice for someone over 50, nearing retirement and needing the money in the portfolio sooner, rather than later.
What this portfolio does differently than the simpler portfolio is it breaks the stocks and bonds up a little more, with a focus on the retirement age.
The portfolio looks like this:
- 25% Large Cap Stocks
- 20% Small Cap Stocks
- 5% International Stock Market Index
- 40% Intermediate Term Bonds
- 10% Short Term Bonds
This portfolio maintains more in bonds than any of the previous portfolios, and focuses on shorter term bonds which may fluctuate less in price and in turn, preserve principal.
Best Crypto Portfolio Tracker Of 2021
With the evolution of cryptocurrency, new developments and software are continuously being introduced to the community. Crypto portfolio trackers are constantly being updated and new features are being added to provide a seamless experience to users. Here’s a list of the best crypto portfolio trackers that are available in the market in 2021.
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Asset Allocation: Why It Is Crucial To Diversify Your Crypto Portfolio
The success of an investment portfolio is largely dependent on asset allocation. Find out how to effectively allocate your crypto assets to reduce risks and grow your wealth.
If you are involved in investment of any sort, diversifying your portfolio is crucial to hedge against the risks involved. It means that you have to invest in different kinds of assets in such a way that the growth of others will balance out possible deprecation of some of them, and in the end, you will still end up with a profit.
There are two levels to portfolio diversification:
For example, on the first level, you may invest in stocks, bonds, real estate, art, and crypto. On the second level, you choose which stocks and bonds go to which fund, make sure to have various sorts of real estate, buy pictures by both promising and renowned artists, and have numerous different crypto coins. Thatâs what asset allocation basically is.
In this feature, we shall look at asset allocation in crypto, talk through typical techniques and risks involved, and cover other important issues relevant to the case.
Model #: The Three Fund Portfolio
The three fund portfolio is a portfolio that has been advanced by the Bogleheads. It keeps to basic asset classes, and is popular because of its simplicity as well as its tax efficiency and low fees.
The portfolio is simple:
- 34% Stock Market Index
- 33% Bond Market Index
- 33% International Stock Market Index
Similar to the Simple Portfolio, this portfolio is designed to be more conservative, but it does have more growth potential due to the international exposure.
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How To Set Up A Cryptocurrency Portfolio
When setting up your crypto portfolio, you will have to make a lot of important decisions. To start, you will have to decide where to hold your cryptocurrencies. The easiest method would be to hold the entire portfolio on a single exchange or in one multi-currency wallet. This way, you dont have to keep track of multiple accounts.
Then, you have to choose which cryptocurrencies to invest in and how much to invest in each. This should always include careful research. You want to learn about the goals of the project, what makes the coin unique, the team behind it, and how far along the project is. Look for projects with bigger and more enthusiastic communities, as this is a good indicator of success. Take the time to look at the whitepaper for a coin before investing in it to learn more about the project.
You should never skip this research as you want to make sure you have the best possible cryptos in your coin portfolio.
Why Diversify Your Crypto Portfolio
The main reasons why you should consider diversifying your portfolio are:
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Type Of Crypto And Use Cases
One of the common strategies is to choose different types of cryptocurrency. You would generally choose the coins that have great potential or are well-performing. The way you determine this is by looking at the trends of the market prices. In addition, you can consider the different use cases of crypto coins. For example, generally speaking, Bitcoin is designed as a virtual currency while Etheruem powers DeFi protocols. This would be a matter of personal interest or what you think would be beneficial in the future.
Dont Put All The Eggs In One Basket
The potential to earn more is proportional to your initial amount, and the same goes for the loses. Our objective is to minimize the possibility of fails. Even though cryptocurrency has been around for a long time, its still in its infancy stage. If we look at the current market cap, we see a lot of growth potential. Most likely, any good coin with a use case will grow. However, what is the possibility that the market cap growth is going to be driven by one coin vs. being driven by many coins? A smart way to safely capture the overall growth of cryptocurrency is to diversify and reap the advantages of growth from multiple coins. For example, between January 2016 to January 2018, Corgicoin has increased by 60,000x. Verge has increased by 13,000x during the same period, and Bitcoin has risen by 34x. While youd have gotten spectacular gains from Bitcoin, but diversifying into other coins could have landed significantly larger gains. The same strategy would work to prevent major loses. If you were to invest all your money in one coin, all your hopes would be crushed if that coin failed. However, splitting the investment into several coins would have you on float even if something happens to one or two coins.
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Cryptocurrency Trading Is All Trial And Error
As you build out your cryptocurrency trading portfolio, youll probably find other tactics that also fit in well with your trading strategy. Additionally, youll most likely try out advice that sucks. You may even find that you dont agree with the tips listed here.
And, thats okay. Becoming a cryptocurrency trader is a learning process, and each investor inevitably molds their own unique style as they become more experienced. The important thing to remember is to keep an open, yet skeptical, mind and enjoy the ride.
How To Diversify A Crypto Portfolio
As with any type of investment, it is best to diversify your cryptocurrency portfolio. There are several ways to diversify.
The most important is to diversify based on market cap. Remember that high-market-cap coins have the lowest risk but also the lowest potential profits. Low-market-cap ones come with the highest risk and the highest potential profits. Medium-market-cap coins sit in the middle. You ideally want to diversify across these three types of caps. That will let you balance out your overall risk.
You can also diversify your cryptocurrency based on other factors, such as the type of project. For example, you could invest in cryptocurrencies used as payment as well as utility tokens or other types of coins.
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The Universal: Start By Understanding Risks And The Risk Profile Of Crypto As An Asset Class
“Risk” is the likelihood that your investment might be worth less at a theoretical “exit” time than what you invested,or where you need it to be at that point to meet your goals.
If you want to get fancy, you can complexify it a little and say that risk is the likelihood that your investment would be worth less than you invested plus what you did not earn by investing in something that didn’t lose money .
The risk that your investment is worth less in the future may be due to different causes. We call those the different “types of risks”. The types of risks are different for each asset.
Some to be considered for Crypto might be:
- : the risk that the price is down when you want to exit. And because Cryptos are volatile, it’s more of a risk than in other assets.
- Regulatory: Governments could ban or make Crypto harder to use, which would have a negative impact on the price
- Technological: the blockchain could be hacked
- Counterparty: the custodian you are holding your crypto with goes bankrupt and can’t return you your money, or you lost access to your own private wallet.
Different types of assets have different risks associated with them. Crypto and smart contracts are exposed to a type and degree of Tech risk that Equities are not. Equities offer a different risk profile than bonds because creditors get paid first in the event of bankruptcy while shareholders usually get nothing.
Top 5 Cryptocurrency Portfolio Trackers
Cryptocurrency portfolio trackers enable investors to track their assets efficiently. They no longer need to log in to different accounts. Instead, they can manage their crypto assets in one place. With these trackers, investors can see their profits and losses from all their cryptocurrency investments. They can also see market prices in real-time and set up essential notifications.
We rounded up five cryptocurrency portfolio trackers based on their number of downloads and star rating on Google Play.
There are dozens of more apps of this kind, but these five cryptocurrency portfolio trackers have the most number of downloads. While each of them has unique features, they all give users market price updates. They also provide users with a glimpse of how their investments are doing, saving time and effort.
Cryptocurrency investors may have anywhere from three to more than 20 crypto assets in their portfolios. Tracking each of them requires a lot of effort and may even be confusing at times. As such, cryptocurrency portfolio trackers are handy tools that allow investors to manage their investments from one place.
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Why Is Crypto Portfolio Diversification Important
To mitigate such levels of risk exposure, it is advisable to spread one’s funds across a range of digital assets. This investment strategy reduces the magnitude of losses incurred in times of market downturn. Since you have invested only a fraction of your fund in Bitcoin and distributed the remaining to a variety of coins, it is unlikely that a 50% Bitcoin crash will be as devastating. This is because the performance of the constituent crypto-assets of a diversified portfolio would balance out the losses.
Note that the risk inherent in a Bitcoin-focused strategy is also present in an investment plan that focuses on Ethereum or any other digital asset. The goal here is to ascertain that you are not heavily invested in a single cryptocurrency be it Bitcoin, Ethereum, Binance Coin, or any of the 5,700 other digital assets.
How To Build A Well
Balancing a crypto portfolio is not that different from balancing a traditional portfolio. You can easily reduce your overall risk according to your profile and investment strategy. All it takes to get started is simply diversifying your investments among different cryptocurrencies.
The extent to which you diversify is up for debate, as there are pros and cons to both sides. However, it’s generally accepted that some diversification is beneficial. You can reduce the risk of your investments by holding different crypto assets and making sure to rebalance your asset allocation regularly.
To make managing your portfolio easier, you can use a third-party portfolio tracker or manually record your transactions on a spreadsheet. Some trackers can be linked to your personal wallets and cryptocurrency exchanges, making the process more convenient.
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