The Only Crypto Tip You NeedPosted by: admin | Posted on: June 22, 2019
There are numerous articles about hacks, tips and strategies for crypto investing. Some of them work, others not so much.
But here’s the only tip you’ll actually need in crypto trading:
What is diversification?
Diversification is a risk management strategy that involves investing in a range of assets. This strategy has been used in both the traditional and crypto markets.
Why should you diversify?
Crypto coins, despite their popularity, are still an emerging class of assets with virtually no regulation, no intrinsic value and little support from large institutions. As the market is so small, it can be influenced by the smallest things that don’t necessarily affect gold or fiat. On the other hand, crypto exchange and wallet hacks also have a huge effect on crypto prices.
The prices of crypto-assets are always shifting and in order to combat huge losses, you need to have multiple crypto coins in your portfolio. When the price of one or a couple coins fluctuates the others help to keep your portfolio price relatively stable.
- Correlation with Bitcoin
It is no secret that all cryptocurrencies and their prices are in one way or another related to Bitcoin. This is because Bitcoin is the best-known crypto coin and as the Bitcoin price changes the interest in cryptocurrency shifts too. Since the prices are largely related to the number of transactions, it also affects Altcoin prices.
Even though some people believe that there’s no point investing in Altcoins since their connection is so apparent. However, Bitcoin and Altcoin returns are quite different.
- Increase profits
Diversified portfolios are proven to provide higher long-term profits. A portfolio that contains several valuable coins has shown itself to gain higher profits than a portfolio with only Bitcoin.
What coins to hold?
- Big Market Cap
The first type of coin to consider is a crypto-asset in the TOP 20 by market cap. This is because big market cap coins have already proven to be trustworthy, they also have higher liquidity and are considered too big to fall.
Some good examples are Bitcoin, Ether and Dash.
- Lower price
On the other hand, crypto coins with lower volume are also good to diversify with. This is because they haven’t reached their full potential yet and are more likely to offer higher returns.
For instance, Cardano, Stellar, Bytom and Qtum, are great coins with lower prices and big potential.
- Smaller total supply
Another thing to consider when diversifying your portfolio is the total supply of the assets you’re buying. If the total supply is too big, the coin will have a harder time to increase the price quickly. So when you look for crypto-assets that will gain on price soon, invest in crypto coins with smaller total supply.
For example, Dash, Monero, Zcash and Elastos are great investments.
In conclusion, by diversifying your portfolio you get the best of both worlds: higher gain and lower risks. Of course, diversified portfolios are harder to monitor, but you can always use a cryptocurrency portfolio trackers for that. If you don’t know how to use them, no worries! Just check out this awesome guide for cryptocurrency portfolio management.