You’re likely to experience a dilemma when you’re building your portfolio of assets. There are so many cryptocurrencies out there, which one will you pick?
As with any investment, there is always a balance. You have to be careful with the risks you take, but you also want to maximize your returns in order to grow a good crypto portfolio in time. In this article, we outline some possible ways you could structure your portfolio, but remember everyone has different risk tolerance and financial goals.
How Much Crypto Should I Have in My Overall Portfolio?
Cryptocurrencies are a new breed of asset class, promising high returns with equally high risk. As they grow in adoption worldwide, they now merit inclusion in your portfolio. When you start, you can allocate up to two percent of your total portfolio to them and increase the percentage with time.
Investments in things like cash, real estate, and gold can offset the risk in your crypto. Remember that it is possible to lose all of your cryptocurrency, so by investing in things like these, you are not putting all of your eggs in one basket.
What Percentage of Bitcoin Should I Hold?
Entering the world of cryptocurrencies is empowering and exciting, so you should get to know how it works. Bitcoin is the most popular cryptocurrency and has a 43% share of total crypto market cap. This means that when Bitcoin moves, the market moves, too.
The best way to start a cryptocurrency portfolio is to give at least 60% of your funding to Bitcoin, the #1 coin. With this investment strategy, the risk is also minimized. After learning more about Bitcoin and Ethereum, you can invest in other top 20 coins. An option would be to hold 30% Etherium and allocate 10% to the more risky altcoins.
Investing in coins can be a risky endeavour as you might take a 10x, 20x, or even 100x loss. However, over time and with confidence, you can confidently invest in coins with 10x or 20x potential.
How Many Altcoins Should I Hold?
A well structured crypto portfolio should be diversified. Putting all eggs in one basket will result in everything being lost. Diversification is a practice of not doing this, and the benefits are that there’s a better chance for profit and less risk.
Diversification comes with both advantages and disadvantages. One of the major disadvantages is that you limit your upside by spreading your resources thinly across different things (wallets, wallet types, information updates/news, legal and tax requirements) which can become too much to handle.
Considering you should be keeping track of the news and current state of the crypto projects you invest in it is recommended to hold 8-14 crypto assets in your portfolio.
Where are We in the Crypto Cycle?
The crypto market is in a 4 year cycle with accumulation periods and bull markets. It’s tough to predict when the market will change from one to another, so we must be ready for anything. Although the 4 year cycle has held true for the last 10 years there are many signs that it may be coming to an end as institutions adopt crypto and it goes mainstream. Trying to time the cycle can be risky and it can be wise to buy solid cryptos when they are good value and hold for longer periods of time.
Conclusion
It can be a hard decision on how to structure your crypto portfolio. There is much hype around many projects that people think will go to the moon. However the reality is most of them will fail and the investors will lose their money. It’s recommended to focus on Bitcoin and Ethereum and the other major alt coins that have solid projects with utility and increasing market adoption. Some of a balanced portfolio could be allocated to riskier altcoins but not more than 10%.
As to how you balance between real estate, stocks and crypto that is impossible to say. Every investor has different needs and knowledge. You should only invest in a market you understand well. One possibility would be to allocate a third to crypto, a third to stocks and a third to real estate.
Note: nothing in this article is financial advice, it is for entertainment only. The author of this article is not a financial advisor.
