Building the crypto portfolio is only the first step towards a long journey in the crypto world. If you are new to the sector, then going through the following article might turn out to be beneficial for you.
Diversification has always been the fundamental principle that will aid in portfolio management when it comes to digital assets. Here are the strategies that will be effective in the portfolio management of cryptocurrencies Crypto Genius.
Strategy #1: Dollar-cost averaging
You may be among the investors who do not possess a significant lump sum that you can transfer anytime from the traditional investment portfolio to the crypto portfolio. Thus, the solution is to make regular small investments. Use the income cash flow to invest.
Dollar-cost averaging is the process of limiting the investment to a particular dollar amount, regardless of the price of the crypto. Once you enter the investment world with regular increments, you can ease out the anxiety building up from the wrong timing.
When the price of the asset will rise, you can add more cryptos in the bull market. But when the price dips, you can add even more cryptos as the investment amount translated into the fiat version will remain the same.
Strategy #2: Invest in stablecoins
Do you need an assured shield against inflation and volatility? Then you need to go focus on how to minimize the chance of complete capital loss. Diversifying the portfolio is never an easy task, partly because most of the cryptos have co-relations.
So, why don’t you maintain the investment of the biggest percentage of the portfolio in large-cap coins like Bitcoin or Ethereum? It’s true that you can’t expect big gains from Bitcoin as you can from Altcoins.
But it’s also true that BTC will lose much lesser than the altcoins even in the bear market. Most of the investors fail to estimate the impact of a sudden crash in the crypto market.
Therefore, it’s essential that the portfolio management strategy should equip you to face the bear market even for a prolonged period, without any financial crisis.
Strategy #3: look for cryptos with different use cases
If you really want to manage the crypto portfolio adeptly, you need to invest in assets that have different use cases. Cryptocurrencies primarily serve as a medium of exchange.
For instance, Bitcoin is a means to preserve and increase wealth. If you are ready for a long-term investment, then the return can outsize the investment. The same applies to Ethereum too.
You can also allocate a part of the portfolio for the stablecoins. These stablecoins have a value that maps to some underlying asset, mostly fiat currencies. It’s the consistency of the stablecoins like tether (USDT) or USD Coin (USDC) that will help in taming the volatility of the market.
Strategy #4: Maintain an exit plan
The investment can go right for a few years, and then, there can be some bumps. Sometimes, you make investments without analyzing a few questions. And this can lead to bigger downfalls. Thus, to avoid delving into the deep pits in the crypto sector, you should have a perfect alternative plan for exiting the market. In simple words, you should know when to sell your assets and when to keep them.
For every trade on bitqt, you should have a clear notion of the following factors:
- The reason for investment
- When do you expect to draw the profit and what’s the reason
- When do you want to stop loss and what’s the reason
- What type of information or trend can change the investment thesis
Unless you manage your expectations properly, you cannot manage the portfolio appropriately. Impulsive decisions lead you to big gains or big losses. Balancing the same is essential for ideal portfolio management.
Understanding the portfolio management game
The market volatility is a factor in the crypto market which keeps on changing the price every now and then. You might invest your sum when the price of the crypto is high but the very next moment, you might see the price falling down. That is why you need a suitable plan for mapping out your investment strategies. All these strategies keep on changing with time. Thus, the only thing which you should focus on is portfolio management. Keep an eye on the real-time as wheel as historical market data
- Performance analysis is necessary at frequent intervals.
- Look for trade aggregations across multiple crypto exchanges and their counterparts.
If you can get a strong hold on the portfolio, you can gain or at least prevent loss.