Strategy for creating a cryptocurrency portfolio: how to do everything quickly and with minimal risk?

What is the peculiarity of the cryptocurrency market?

One of the distinguishing features of the cryptocurrency market is its high volatility. On some days during the day, the coin rate can change by 20% — 30%, so none of the investors risk investing in one asset. The solution to this problem is a cryptocurrency portfolio. We will tell you how to create it quickly and with minimal risks in this article.

What is a cryptocurrency portfolio?

A cryptocurrency portfolio is a collection of all available digital assets of an investor, collected to achieve a specific goal. In most cases, we are talking about earning on the growth of cryptocurrencies in price.

How to choose your portfolio cryptoccurency assets?

We have already figured out that a high level of diversification is a key factor in the formation of a balanced cryptocurrency portfolio. Now we will focus on the criteria that you should be guided by when choosing a digital currency.

• Prospects. Analyze what idea is behind the coin. Perhaps will transactions become anonymous? Or can you pay with it in any country in the world without huge commissions and an unprofitable conversion rate? If the developers came up with a coin as a solution to a particular problem, then such an asset can be safely purchased. Otherwise, you may run into a fraudulent project whose main goal is to steal your funds and quickly disappear. If you are poorly versed in this topic, then you can familiarize yourself with coin reviews from experienced traders. Pay attention to the project team. Well-known developers are unlikely to participate in a dubious project.
• Rate change. Information on coin volatility plays an important role. Find out how often jumps occur in the course. Look at its current market rate and average daily trading volume. An important factor is the capitalization of the coin. Beginners are not recommended to invest in coins whose capitalization is less than one hundred million dollars. When a coin grows in price, it is important for you to understand the reason for this event. There are two options: either it began to rapidly gain popularity, or it is a short-term effect from a fraudulent scheme.
• Community. An active community should be an incentive for you to invest. If developers are willing to contact potential investors, have a detailed WhitePaper and community activity (for example, in the bitcointalk.org branch), then you can safely invest your money in this asset.
• News. Keep track of news related to the coin you are interested in. One negative news item (for example, a detected bug) can negatively affect its value. Constant monitoring of news will help you react with lightning speed in the market.

In our past material, we talked about what schemes should be followed when forming a portfolio. But where can it be created with minimal risk (mainly from hacking)? There are several options:

• Create an account on the cryptocurrency exchange. For example, LocalBitcoins, Binance, or EXMO. In addition to purchasing coins, you can use the built-in functionality, which should help in choosing the right asset. You can see graphs of changes in value or capitalization for any period.
• Use multi-currency cryptocurrency wallet. Experts believe that this is the safest option. Your assets will be completely safe, as a constantly improving multi-level security system will not allow attackers to steal your funds. The best options to date are Ledger and Trezor hardware wallets. You can choose any coin you like and easily purchase it.

What mistakes beginning investors make?

Many people, inspired by the success of other people, start investing in digital currencies without paying attention to some important details. As a result, leaving in the “minus” and disappointment. Now we will briefly analyze the typical mistakes of novice investors so that your investments will be competent and profitable.

• Wrong choice of coins. Beginning investors quite often engage in artificial excitement and acquire the first digital asset that comes across. As a result, they risk saying goodbye to all the money. Remember that only a thorough, unhurried and thoughtful analysis is the way to success.
• Failure to Follow Precautions. Keep your assets only on exchanges and wallets with a high reputation. Having succumbed to a better rate at a little-known exchange, you risk becoming a victim of scammers.
• Untimely purchase and sale of digital assets.Coins need to be purchased when its value is minimal). And to sell — at the peak of popularity. Otherwise, the yield can be greatly reduced.
• Lack of flexibility. Be flexible. Sell assets that have begun to depreciate, and buy promising ones. This will allow you to increase your return on investment.

Following these simple rules, you can achieve your goals when investing in cryptocurrencies. Over time, you gain experience and can increase profitability.

This article is not a recommendation for investment or investment in cryptocurrency, as well as perceived as investment advice. Be careful, because investing in cryptocurrencies is very risky and you need to consult with your financial advisor. Past earnings do not guarantee future earnings.

Holderlab.io is a service for automated crypto portfolio management with automatic rebalancing of assets (threshold or periodic), searching for efficient frontier and analysing assets using a correlation matrix and other crypto investments tools.