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How To Diversify Your Cryptocurrency Portfolio

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cryptocurrency diversify

Never put all your eggs in one basket.   Every smart investor knows that, as do cryptocurrency investors.  And if not, they should.  The key, of course, is to diversify among many coins — not just one.

Diversify Your Cryptocurrency Portfolio

Diversifying your crypto portfolio is no small feat.  A well-diversified portfolio would inherently contain a mix of large, medium and small market cap coins.

One of the best ways of minimizing your risk is to invest in a range of coins with varying market caps.

Such an ‘all-encompassing’ approach to diversify becomes significant considering the volatility of the crypto market. While large and medium capped coins provide you the needed stability, small capped coins can fetch you excellent returns. Moreover, coins with small market caps would most likely have low prices. So you will not stand to lose much if the coin fails to deliver on your expectations. Therefore, such a strategy can shield you against any potential financial losses that you may incur.

Another easy observation you can make is the high correlation of cryptocurrencies with one another. The price of Bitcoin affects the overall costs of currencies. Therefore, it can act as a valid indicator for your chosen assets and how you can craft the perfect portfolio.

However, the most significant way of maximizing your gains includes the creation of a diversified portfolio. The inclusion of a mix of coins with varying market caps would merely mitigate the chances of your financial losses. To maximize your gains, you must invest in coins that have the potential to deliver maximum profits. However, such a step is fraught with risks. So, here are the steps to create a well-diversified Portfolio with limited risks:

Consider the Market

Learn the fields and sectors of the blockchain industry in an effort to diversify. The industry is young, and there are a plethora of industries in which you can invest. Here are a few examples of crypto sectors in which you might consider investing.

  1. Financial: Stellar, Wanchain, OmiseGO
  2. Currencies: Bitcoin Cash, Litecoin, Bitcoin
  3. Dapp Platforms: Ethereum, Cardano, Lisk, NEO, EOS
  4. Media: BAT, Steem
  5. Privacy: Dash, Monero, Zcash

These are only a few industry sectors where you can invest. The Blockchain technology is new, and you can never predict which industries will accept this technology. Therefore, consider investing in a range of industries. Do more research and look for the growing technologies in the blockchain sector.

Invest more in your favorite industries

Putting money in a range of industries enhances your ability to diversify as well. However, consider investing additional capital in industries about which you are most confident. Although some people believe that only one coin per sector will emerge victoriously, that isn’t the case. Wells, Fargo, T-mobile, American, and Delta are a few examples that have successfully defied this notion. If you believe in the inevitability of the blockchain technology, consider investing in Filecoin and Sia. If you think supply chain projects can deliver excellent returns, consider putting your money in Waltonchain and VeChain.

Look For Gems in the Industry

The most fruitful strategy to diversify in crypto investing is looking out for new businesses. They have high potentials and can quickly return great value on your investments. The only catch is, you need to do enough research to gain credibility and make the calculated risk.

To start with your research look for new white papers, learn about the team, their work experience, and their backgrounds. Use this information to analyze the potential of future businesses.

Go for Trial and Error Methods

Once you start building your portfolio for cryptocurrency trading, you will discover several tactics. Few of these will go well with your trading strategy. However, few of these methods might not prove too beneficial. Worse, they might do you some severe damage. But experience gives you new lessons to learn. You may not conform to some of the methods listed here as well. But you are at liberty to try whatever suits you.

To diversify your cryptocurrency portfolio, you will undergo a learning process. Experience would play a critical role in that process. Investors develop unique styles as they gain experience. The most crucial thing to keep in mind is to have an open approach, yet tread along a cautious path. Following such a plan is the only way to make the most out of your ride.

 

 

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