Diversification is important whatever the type of asset you invest in, and with over 20,000 coins available right now, you shouldn’t have any issues finding ways to diversify with crypto. The thing with cryptocurrencies is that they can be extremely different from each other, unlike forex where all currencies perform the same functions. Cryptocurrencies are like a hybrid between the foreign exchange and stocks and digging deeper into different kinds of cryptocurrencies will help you create a portfolio that will offer more protection, and stability, while maximizing your returns and liquidity. Let’s take a look at a few tips for building the perfect cryptocurrency portfolio.
Always Have a Big Three
Everyone needs to own some Ethereum and Bitcoin. These are the two most respected and solidified cryptocurrencies in the industry, and you should keep your eyes on Bitcoin and Ethereum price action at all times.
You should, however, have a third crypto that will act as a dark horse. For some people, it might be something like Litecoin, while others might want to look at coins like Solana or Cardano. Just pick one promising coin that is highly respected and be flexible with it. If one coin starts creeping up or catches your interest, this third coin can be replaced, but it should always be by a coin that is just as respected by the community with a solid history and a good project backing it.
Learn about Coin Types and Pick from Each Category
There are four main types of coins you need to know about when you get invested in cryptocurrency. These are utility coins, payment coins, security coins, and stablecoins. Each serves its function, and you should try to have at least one in each category. Utility coins are coins that are meant to be used on certain platforms and perform specific functions. Ether is a perfect example of a utility coin. Payment coins like Bitcoin were meant to be used as currency, while security coins are meant to represent ownership of a specific asset.
Stablecoins, on the other hand, are completely different from other coins in that they’re not meant to appreciate. Instead, their goal is to provide stability and liquidity to your assets. Stable coins like Tether, for example, replicate the price action of the US dollar but are accepted on virtually all exchanges, unlike the dollar. This means that you can use it to make quick transactions over the blockchain and exchanges without the volatility of regular crypto and or the limitations of fiat money. So, start learning about the top coins in all categories, look at their price history and relevance, and add a few to your portfolio.
Learn About Projects in Detail
Never pick crypto simply because a few people are raving about it on YouTube or Reddit. Instead, try to look into the people behind the coin and the project. Learn how to read white papers, and think twice before investing in coins for projects you don’t understand or believe in.
These tips should help you find great coins to add to your crypto portfolio. The most important part is doing as much research as you can on any coin you’re interested in and learning about crypto and the technology behind it in general before you start investing.
