27 June 2022
The year 2021 delivered the market gains that most investors wished for. Energy shortage, supply chain disruptions, and logistical disturbances, as well as an environment of rising inflation, weighed heavily on the markets, providing a solid base for uncorrelated assets like Cryptos to flourish. Solana was perhaps the greatest champion in the Crypto class in 2021, with profits of almost 9649%, followed by Ethereum, which climbed 265% thanks to its widespread use for DeFi and other applications. Bitcoin had a rough year, yet it obtained more than 65% in 2021. Several rookie Crypto traders are only interested in purchasing one currency. Their Crypto performance, on the other hand, is based on the mood, development, and community surrounding that particular project. Because few projects will surpass others, having a well-balanced Crypto portfolio will help protect you from large losses.
Each investor is looking forward to developing the ideal Crypto portfolio for themselves should keep in mind that, despite its growing popularity, Crypto remains a highly volatile investment. This is important to remember while building a well-balanced Crypto portfolio and managing it. In addition, unlike traditional investment portfolios, Crypto portfolios feature a single asset class with a greater overall risk profile.
And what's the optimal strategy to handle your Crypto portfolio in 2022, with such volatility? You're closer to having a long-term Crypto portfolio if you have a well-balanced Crypto portfolio. Investing in digital assets is a fairly new concept with a slew of daunting terminology. Before jumping in headfirst, carefully study and examine them thoroughly. If you're ready to get started, here are 7 different ways to assist you in achieving that balance and managing your Cryptocurrency portfolio.
1. Be rational:
Cryptocurrency Values may be very volatile, with big swings on both sides. Furthermore, Blockchain technology, which Crypto is based on, is very new and fascinating but don’t allow all the excitement to send your emotions into overdrive. Fear of missing out on FOMO is a significant reason why traders struggle to manage their portfolios. Emotions often lead to purchasing a high-priced asset, only for a significant correction to follow up. Furthermore, when the market loses 30%, we may feel concerned since we don’t know if the correction will deepen and become a 70% correction. However, professional and successful Cryptocurrency Traders and investors are usually sensible regarding their strategies and objectives. Therefore, there will still be solid investment opportunities to increase the total value of your portfolio. Technical analysis eliminates emotions and aids in developing more disciplined trading techniques. Everything you need to do is stick to the plan.
Diversification refers to the process of exposing your portfolio across as many various types of assets, markets, industries, and regions as feasible so even if one fails, others can still prosper. From the perspective of Cryptos, this implies that don't only buy Bitcoin; diversify your holdings among various Cryptos. Buy, trade, and even invest in stocks connected with Cryptocurrency, including mining businesses and Crypto platforms, to get exposure to them. Diversification is the key to ensuring that your portfolio can withstand any storm.
3. Dollar-cost Averaging:
Several investors may not shift a big chunk of money from traditional assets to a Crypto portfolio. As a result, making regular small investments from your income, regardless of Crypto prices, is a great way to build up your portfolio. Consequently, the dollar-cost average is one of the most effective portfolio-building methods in both rising and falling markets. Dollar-cost averaging (DCA) is an automated strategy for investing a predetermined dollar amount regardless of the price of a token. By making your investment in regular amounts, you can avoid threats that come with bad timing. In a strong bull market, one can add extra shares if the Crypto price rises. Because your investment amount in fiat terms remains stable, it will be possible for you to add even more shares if the Crypto price falls.
4. Dividends and passive income:
Other than stocks, Cryptocurrency does not pay monthly dividends, but it does allow one to invest them for passive income. Research and study staking, lending, and lending protocols in 2022 to make your idle tokens work for you.
5. Follow up with popular investors:
The TikTok Investment influencer rose to prominence in 2021. Because many new traders had no idea how to invest in Cryptocurrency, they relied on the advice of Instagram and TikTok celebrities. The terrible part of this narrative is that these influencers do not have a demonstrated track history of trading success, and, as the phrase goes “those who can do, cannot teach”. Rather, concentrate on imitating professional traders. Social trading platforms like NAGA and eToro can help you achieve that. NAGA is a publicly listed business, and all of the industry leaders are entirely open about their trading results. You can check how their portfolios are doing and how much money their copiers are bringing in. Copy-trading allows you to automatically copy their deals, and the greatest thing is that you don’t have to be a trading expert to do it. It allows the industry professionals to handle all of the research and planning while you benefit from their experience.
6. Risk management:
According to several Crypto experts, one should only invest in Cryptocurrency up to 5% of your whole wealth. They are as we all know, very volatile assets that can fluctuate by as much as 10% or more in a single day.
7. Watch out for utility:
Whilst Bitcoin is the ruler of speculative assets, it was founded as a global method of financial exchange. It didn’t work out that way because of its volatile character, which makes it unsuitable as a payment mechanism, but it does provide opportunities for investors and day traders. If 2021 taught us anything, it's that the true Crypto champions are the ones with real-world use and application. Take a look at Ethereum and Solana as examples. Consider the initiatives or protocols that lie behind Cryptocurrency when investing. What is the extent of their utility? How many projects do they host, or how many users do they have on their networks? This is a solid indicator that a winner will emerge. Meme Cryptocurrencies are adorable, however, do they have any real-world utility amongst them? Most likely not.
Disclaimer: The author’s thoughts and comments are solely for educational reasons and informative purposes only. They do not represent financial, investment, or other advice.