Cryptocurrencies now gain incredible popularity and one should expect the development of this trend in the coming year. Making a crypto-investment portfolio is not a matter of minutes, although many investors, attracted by the ICO wave and the growth of the cryptocurrency market, want to earn as quickly as possible.
Nevertheless, an abundance of opportunities means that it is better to spend time and understand the market. So, let’s look at the key points that should be considered when making a cryptocurrency portfolio.
Bitcoin is a New Gold Standard. On the chart, we compare the yields of a number of leading cryptocurrencies in dollars since the beginning of 2018. Beginning investors like to evaluate the profitability of their favorite coin, comparing it to a local currency, for example, a dollar or a euro, but it’s a mistake — it’s much better to choose as a standard bitcoin or Ethereum.
Why is it Exactly Bitcoin?
The ‘grandfather’ of all cryptocurrencies has deserved this title, because the bull market for bitcoin, which we have seen since 2011, has resulted from the emergence of a whole new market oriented to this cryptocurrency.
- Nobody has ever hacked it.
- It is widely available and well supported in the crypto exchange markets around the world.
- This is the most liquid cryptocurrency (it is easy to find a buyer or seller).
- Many more modest cryptocurrencies yield less profitability than bitcoin, and they are difficult to trade with.
Ask yourself if it is worth buying a coin that is not too famous? In many cases, in the long run, it is enough to buy bitcoin and wait a few years.
Understand Your Risks
t is very important to ask yourself a few questions related to cryptocurrency risks, and write down the answers:
- How much does it cost to invest?
- What part of the capital can you safely lose?
- What are your investment goals?
- How far are you from retirement?
There is a convenient system for assessing risk tolerance: check if you sleep well at night. If you find out that you are always thinking about prices and get up in the middle of the night to check the state of the portfolio, you probably have invested too much — never invest money that you cannot afford to lose!
Do Your Own Research
Probably the worst thing that can be done by deciding to invest in cryptocurrencies is to invest impulsively, after hearing someone’s advice – it’s your money, not somebody else’s! Nowadays, more information is available than ever, and, of course, there are pluses and minuses. The Internet is full of a lot of information that is easy to find, but difficult to interpret. Nevertheless, a smart investor must do this work. Each project tries to show itself in the best light, and, although there are no ideal companies, many of them are downright fraudsters.
Take All Responsibility for Your Decisions
Now that you have done this work, it’s time to add selected coins to the portfolio and face the consequences, because you are fully responsible for all your investment decisions — both good and bad. It is responsibility that will make you a good investor. Don’t be deceived when you are told about risk-free investment — there is always a risk associated with the very nature of the market. Taking responsibility for your mistakes, you learn — it is the only way to become better.
When we see double-digit return in the bull market, it’s hard not to rush from one asset to another, but is the very thing we should avoid — be patient, play the “long” game. The market will not get away from you. If you are not a talented and active day trader, a longer-term HODL’ing strategy might be a better option for you. Remember that no one gives guarantees. You can look at this from the other side: patience is one of your many trading tools. Yes, if the coin becomes cheaper to zero, it does not pay off, but patience is an important asset, because it improves your investment skills.