Investing in cryptocurrencies is a very popular way of earning money these days. Many people have probably heard about the existence of such coins as, for example, Bitcoin or Ethereum. Some of them tried to make money on this. Someone did it, someone didn’t. Unfortunately, today few people know how to properly invest in cryptocurrencies. The result of this kind of investment is often very deplorable – the only currency at some point begins to quickly fall in value and people try to get rid of the unprofitable asset faster. As a result – the loss of part of the funds and complete disappointment in this area.
However, if it is reasonable to approach the investment process, then you can make good money on this niche. One of the most effective ways is to create the best cryptocurrency portfolio.
Why is it a smart move?
There is a simple life example. A man keeps money in a bank. With a high degree of probability, he will choose not one currency (for example, euro), but several (for example, dollar, euro and British pound) in a certain proportion. In the event of a sudden fall of one of them, an increase in the value of others will help to compensate for losses and even remain in the black. The same principle applies to cryptocurrencies. Concentrating on only one currency, you can easily lose everything at once. By properly optimizing your crypto portfolio, you can reduce the risk.
As part of this material, we will tell you how to create the best cryptocurrency portfolio and give a couple of examples for clarity.
One of the most important factors when choosing a cryptocurrency is the demand for users in everyday life. If it is often used in calculations, there are smart contracts that have proven themselves in practice, then you can safely take it. For example, Bitcoin is accepted as payment in some European cafes or restaurants. Ethereum, in turn, enables developers to create decentralized applications (DApps) based on their blockchain.
Trading volume most clearly shows how much a coin is used. Detailed information can be obtained on the authoritative resource coinmarketcap.com. If the figure is growing steadily day after day, then we can safely talk about the prospect of increasing the coin in price in the near future.
Cryptocurrency correlation coefficient
Cryptocurrencies to one degree or another correlate with each other. For simplicity, correlation with Bitcoin is usually used. Some depend on “digital gold” to a greater extent, some less. If several coins have a high and at the same time correlation coefficient with Bitcoin (for example, about +1), then it is best to limit yourself to one of them. Otherwise, the collapse of Bitcoin may lead to a decrease in the cost of others.
Check the correlation of your best cryptocurrency portfolio with the correlation matrix for free.
Is blockchain application consistent with stated purpose?
Before purchasing a coin, you should carefully study the WhitePaper (digital currency documentation). If the blockchain was created for one purpose, but used for completely different purposes, then in the long run there will be only losses from the coin. In addition, you can backtest your crypto portfolio using Holderlab.io
News in the world of cryptocurrencies plays an important role. They help predict the further rise or fall of the coin. With their help, you can correctly rebalance (change in the percentage of coins in the portfolio) and always remain in the black.
Examples of good crypto portfolios
Crypto portfolio Option No1
Sophisticated but practical.
30% – coins, mainly used as a means of payment (Bitcoin or Litecoin);
30% – popular altcoins (Ethereum, EOS, NEO);
20% – coins with a high level of confidentiality (a number of large companies are interested in data safety, therefore anonymous cryptocurrencies are the best option for them) (Monero, ZCash);
10% – coins specially created for applications (used to optimize processes) (Storm, Metal);
5% – exchange coins (Binance Coin);
5% – hybrid digital currencies (Ripple).
Crypto portfolio Option No2
It uses a simpler portfolio formation approach.
80% – coins that are at the top of the rating and have a more or less stable rate;
15% – new tokens with high liquidity;
5% – projects at the initial stage of their development, whose tokens are relatively inexpensive.
Crypto portfolio Option No3
60% – popular digital currencies;
25% – well-known altcoins with the prospect of further growth;
15% – tokens on the ICO or IEO (be careful)
We have offered you some ready-made portfolios for creating the best cryptocurrency portfolio that can bring significant income in the future. Using these simple, but at the same time effective tips, and timely rebalancing crypto portfolio, you can begin to receive serious dividends from investments.
This article is not a recommendation for investment or investment in cryptocurrency, as well as perceived as investment advice. Be careful, because investing in cryptocurrencies is very risky and you need to consult with your financial advisor. Past earnings do not guarantee future earnings.