How To Build Your 2023 Crypto Portfolio?
An investment portfolio composed of only cryptos is known as a crypto portfolio. This investment portfolio is restricted to a single asset class. Since crypto has become a viable investment option, many investors have diversified their portfolios by investing in crypto.
An ideal crypto portfolio requires thorough research of the crypto market to maximize returns and minimize losses on your crypto investments.
How to Build a Crypto Portfolio?
The more diversified the crypto portfolio is, the better the value for the investor. An investor can get more reliable buyers and sellers in the market. Investors must be aware of the volatility of the crypto market. Hence, it is advisable to invest in multiple crypto coins so that if one crypto coin is facing losses, you can gain from others.
How to Build a Diversified Crypto Portfolio?
There are thousands of cryptos available on the market today. An ideal crypto portfolio will have a mix of market leaders and new crypto projects with high potential. This article has highlighted a few strategies for building a diversified crypto portfolio.
Always Keep Tabs on The Current Value of Crypto.
The crypto market is very volatile and experienced a massive drop in 2022. So it is vital to keep tabs on the crypto market frequently and develop a sense of risk tolerance. Many sources update crypto market data by the second.
Read more: What is Crypto
Identify Gaps in Your Crypto Portfolio.
You analyze your current portfolio and compare it with the overall crypto economy. You can analyze your portfolio by answering a few questions, what are the top cryptos that you do not possess? Are you investing in one crypto heavily? Which new crypto with a high potential use case are you missing?
Reallocate Your Crypto Investments.
Now that you know the gap in your crypto portfolio, reallocate your portfolio accordingly. This action might involve selling a portion of crypto that takes up a lot of your portfolio and reinvesting in high-potential or leading crypto coins that you are missing.
Investing in Market Leaders
Top cryptos have large market caps and are perceived to be more stable compared to newer crypto coins. Top cryptos like Bitcoin and Ethereum are expensive; however, they are divisible by up to 18 decimal places. Users can invest in fractions instead of buying a whole Bitcoin or ETH token.
Read the Research Or White Papers.
Many crypto projects publish white papers, like the Bitcoin white paper that started the crypto revolution in 2008. These research reports or white papers explain the workings of crypto and also consist of a roadmap for the currency.
Users will get a sense of what direction a crypto project is taking, which can help you decide if you want to invest in crypto.
Observe How a Crypto Token is Used.
A crypto token with no solid use may not be valuable in the future, compared to a crypto that is innovative or developing new technologies. Different cryptos have different use cases; some may be for completing payments, while others may be used for cutting-edge applications. Additionally, there are utility tokens, governance tokens, and other social tokens. It is good to have a mix of cryptos from each use-case category. Again, it depends on keeping tabs on the crypto market and staying informed.
Crypto Investment Strategies
Just like investment strategies in stocks, you can use various investment strategies in the crypto space.
- Crypto trading
You can earn returns through trading cryptos on exchanges. This strategy is risky, as the crypto market is volatile, with wilder swings compared to the stock market. But smart investors can make big profits by studying the crypto market closely and implementing crypto trading strategies. Users should be aware of the risks involved in crypto trading.
- Holding crypto
You can apply the buy-and-hold strategy of the stock market to crypto. This strategy is easy, as you have to simply invest in a crypto of your choice and hold it. The strategy is that these crypto assets will appreciate over time and give you high returns.
- Yield farming
Yield farming involves lending your crypto coins to platforms or exchange to earn more crypto tokens. This investment strategy is similar to lending fiat money to earn interest. Users need to lock their crypto assets in a liquidity pool to earn a portion of the interest, transaction fees, or even governance tokens on a crypto exchange.
Diversifying your crypto portfolio is the best way to build your crypto portfolio. It involves investing in cryptos with various use cases along with assets like NFTs. As a crypto portfolio involves investing in a single asset class, it is riskier than a traditional portfolios. Users should do their thorough due diligence and research before investing in crypto.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.