There are a few timeless questions that people often have when they begin investing into cryptocurrency and the answers that they receive often vary. One of those first questions is which coins they could be investing into. This alone could present you with endless possibilities and decisions to make; with some being better than others. But then you have the question which I will be talking about today. How highly-concentrated should your crypto portfolio be? Some people prefer to go the maximalist route and only own one coin. This could be bitcoin, ethereum or any other coin . Then there are others who like to have a more balanced portfolio by investing into each sector of the market. Bitcoin for preserving your wealth, Ethereum for the tech and ecosystem, a few DeFi coins, maybe an ETH competitor such as Cardano or Solana as a back- up plan, Polkadot for interoperability, and a few low caps hoping to hit the jackpot. And lastly, there is the gambler type. These are the people taking the largest risks by investing heavily into lower caps hoping to find a gem that will make them rich quickly. Each category has its own positives and negatives. What may be right for you, isn't right for the next person. At one point or another I have done all of these approaches. Thankfully I had good timing and each one worked out for me, but there is a style that I favor more than others. Let me explain more.
As I mentioned before, I have done all of the above to some degree of success. When I first began investing into cryptocurrency I was investing very small amounts of money. Since I had always heard that one should have a very balanced crypto portfolio, that is exactly what I was doing. I had invited only a few hundred dollars, and already had 5-10 different coins. I would continue dollar-cost-average equally into these coins each time I got paid. But, I quickly became disappointed with just how slow my accumulation speed seemed to be going. Even when the market was in the green, I wouldn't see that much appreciation in my portfolio. I came to the conclusion that my money was spread out too thin across my portfolio to make any significant money, especially since my total amount invested wasn't that much yet. To make significant gains, and also to speed up my ability to accumulate; I needed to change my portfolio strategy to a higher concentrated approach. That is exactly what I did. Bitcoin is the coin that I believe in the most, and felt it was the "king" of all crypto. The absolute must own of any crypto holder. And so I converted all of my coins into bitcoin and became bitcoin only. By buying only bitcoin, gaining interest only on bitcoin, taking advantage of the bitcoin dips in a large way; I was very surprised just how fast I was able to accumulate. I did this for nearly a year, until I reached a bitcoin number that I was very satisfied with.
My opinion is this; cryptocurrency is a risky venture, and so I want to go after the "blue chips" of the space. The coins that have the best chance to be around ten, and twenty years later. That first option was bitcoin. Next, I began investing heavily into ethereum. While a higher percentage of my purchases still go towards BTC, I finally felt safe diverting into another asset. Because I was still only investing into 2 coins, it was still easy to accumulate a significant amount. The approach was the same as with bitcoin; invest heavily, collect interest/staking rewards, recycle my blogging tips towards ETH and it was amazing how fast that stack was able to grow. I look across the crypto industry and I can fully admit that there are many coins that have outperformed ETH or BTC, but those coins value are much more likely to drop in the future as well. Again, if I was spread out too thin the profits wouldn't have been that significant anyways.
While I will always want more bitcoin and ethereum, I have finally reached a point that I think I'm read to start a 3rd major pillar for my portfolio. Coins that I'm considering are Polkadot, Solana, and a few others. The point is this; I feel that when people are beginning to build a portfolio; they often get ahead of themselves. In my opinion, it is better to first establish a position, and once you're ready you can move onto the next position. The steps should go like this;
1) Start by being highly-focused on perhaps just one coin. 2) After reaching a solid amount you can move on to your next coin. 3) Continue step 3. 4) Take a bit more risks on those lower gem coins.
With that said, my focus is only to accumulate as much bitcoin as I possibly can. I believe the world will be a game for those who have bitcoin, and those who don't. I also see ethereum as a blue-chip and therefore will hold onto that and gain a passive income from that. Anything after that, I will wait for a great opportunity to convert into bitcoin.
And that is why I often cringe when I watch YouTube cryptocurrency videos. You will often see the famous question; "I have $1,000, what coins should I buy?" Often the YouTuber will recommend 10 different coins that they should buy; many of them I have never heard of. That first investment needs to be into a foundation to build your portfolio upon. For me that would be bitcoin, for others maybe that would be ethereum.
Yes, I do recognize the whole idea of "the higher the risk, the higher reward." But, you have to remember that I am not here to gamble. I do want to get rich of course. But, I am here to build long-lasting wealth and to hopefully retire early. That is why even though I have built up a very strong portfolio; I am still on step three of my own crypto plan. I'm not a gambler, or a trader.
How about you? Is your cryptocurrency portfolio highly-concentrated, or heavily diversified? Why did you make that decision? Which coin do you believe in the most!?
As always, thank you for reading!
You speak of the Maximillian, balanced portfolio, and the gambler type of trader.
Where does an investor who participates in, and profits from cryptocurrency pump schemes, particularly those in Discord, fall?
Pray do tell.