In the volatile world of cryptocurrency trading, it is important to implement some of the strategies needed to manage your cryptocurrency investments. Managing your investments properly means that your portfolio of coins is protected against risk. This article will explore the different types of coins you should handle in order for you to manage a balanced investment portfolio.
Let’s start by tapping into one of the most important investment concepts. "RISKS"
Risk refers to the possibility of losing an investor who is willing to take for a possibility of gains from his investment.
There are usually two types of risk in the cryptocurrency market:
Market Risk (Systematic): This refers to the risks associated with the overall performance of the cryptocurrency market. This type of risk affects the cryptocurrency market as a whole. A perfect example is the market crash that occurred in 2018 after an amazing 2017. It makes us understand that all cryptos are associated with Bitcoin.
Coin Risk (Idiosyncratic) Risk: Coin-specific risk refers to the isolated risk of a single coin or token in the cryptocurrency market, which is influenced by factors specific to the project itself. If, for example, a project is experiencing a negative event (such as network failure or escaping investors ’funds), then the coin owner who invested in that project will fall victim to the project-specific risk. The risk specific to the coin can be reduced by varying.
The fact is that in the investment market, the risks are as incentive as it is a red flag. Conventional financial knowledge suggests that the higher the risk, the greater the expected return. Not surprisingly, cryptocurrencies are the most riskiest investment you can make.
KEY FACTORS TO CONSIDER WHEN INVESTING
Let’s take a look at the many key factors you need to consider when investing in cryptocurrencies.
Time: As you build your cryptocurrency trading portfolio, it is important to consider the basic elements of tokens and coin trading. By understanding the timing element, you are well placed to know what to do when the market is reddening and the movement is trending downward.
Investment vs. Exchange
You should do some research before investing in anything, especially if you are planning to invest only in cryptocurrencies. There are over 2,000 coins and tokens to choose from and the crazy volatility of the cryptocurrency market can set you up for an uncomfortable ride. In the world of investing, there are two main types of analysis:
Basic Technical analysis and analysis. Investors often use basic analysis to evaluate the long-term prospects and viability of a cryptocurrency. A trader, on the other hand, will use technical analysis by studying price charts, patterns, signals and indicators to make short-term decisions. Knowing which type of individual you are and the types of risk you are comfortable with includes the key to understanding which type of assessment you should use. Short-term trading is risky due to the volatility of markets.
Personal capabilities: Another key consideration that can help your cryptocurrency investment portfolio is to focus on your core competencies and strengths. Some questions you can ask yourself:
What coins and tokens are you researching?
Which sector are you best based on?
Do you understand utility tokens, or are these the security tokens you know?
No individual knows everything, and it is best to build an area of strength comparison. With this, you will be able to call the shots in your area of ability.
4 TYPES OF COINS TO EARN YOUR CRYPTO PORTFOLIO
Let’s take a look at the four different types of coins you should have in your cryptocurrency portfolio and better manage your risks.
The Promoted Father: Bitcoin (BTC)
Bitcoin is currently the largest cryptocurrency based on the market cap and constitutes more than 50% of the global cryptocurrency. By holding a certain percentage of Bitcoin, you can provide a balance in your investment as a market downtrend or uptrend that is almost always initiated by Bitcoin. Bitcoin is also the default currency of the cryptocurrency world and must be purchased before any other altcoins or tokens. It is important to have a portion of your Bitcoin portfolio.RECOMMENDED HOLDINGS: 25% - 33% OF YOUR PORTFOLIO
The Most Popular: Ethereum (ETH)
The most popular coin in the world of cryptocurrency is the most credible and generated. More than 85% of the tokens available are built into the platform. Although there are many notable competitors like NEO or WAVES, it still holds the fort.
Ethereum is also one of the coins used alongside Bitcoin as a base currency because it is faster than Bitcoin. The use of Ethereum is also associated with its price; the more developers and projects built into Ethereum, the higher the demand for ETH coins, which will lead to price increases. Having a portion of your investments in established and credible coins like Ethereum is essential to stabilizing your portfolio.
RECOMMENDED HOLDING: 15% OF YOUR PORTFOLIO
Passive Income Provider
There are some coins and tokens that will help investors earn passive. These coins conduct regular monthly, quarterly or bi-annual distributions. They will reward you with free coins just by keeping your current coins.
Airdrops is a way for projects to present themselves by providing free coins. Hard forks are coins that have been duplicated and given a coin that wants to deviate or move away from an existing coin. An example is Bitcoin Cash, which is separated from the main chain of Bitcoin due to ideological differences.
By holding a good portion of a profitable passive token, you will be rewarded regularly for maintaining brand faith. As an avid investor, you want to be in a position of having a risk mix in your portfolio from high to low. A passive income earning-token is a must have.
RECOMMENDED HOLDING: 25% OF YOUR PORTFOLIO
The Market Hedger: Stable Coins
The crypto scene is notorious for rising prices and it is only fitting for you to 'take over' or mitigate your risks. The preferences of stablecoin such as Pax, TrueUSD, USDC, and Tether are known as stablecoin because they are tied to large currencies and origins from the crazy swing of the cryptocurrency market price.
Stablecoins are a great way to protect your portfolio from volatility and provide you with the necessary liquid (or 'cash') whenever you need it. Imagine putting all your money into cryptocurrencies and the market takes a deep dive; you will lose a major part of your investment. It is therefore important for you to always keep a portion of your portfolio in stablecoin so that you can cash out as needed or just buy more cryptocurrencies when prices dive. This action plan will also prevent major losses to your portfolio.
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A good diversified portfolio goes a long way to ensuring success in the ever-evolving and volatile cryptocurrency market. There are over 2,000 coins and tokens with varying levels of risks and characteristics for investors to choose from. Having a balanced portfolio across all four categories of coins can save you from many headaches and worries. Finally, investors should always make a thorough effort before investing in any coin.
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