Crypto Trading 101 | How to Build a Crypto Portfolio
It can be tough to balance all the different coin pairs available in the crypto market, with so many coming and going fast — it is easy to lose track of what those coins do and how they are different from each other. In this article, we will give you a guide for building a diversified portfolio.
Why Allocate Different Amounts of Tokens to Different Projects?
It is vital to diversify token investments and the cryptocurrency traders holding them.
Diversification reduces risk
and means that there will still be other coins with good prospects in the unlikely event a cryptocurrency crashes. One way to do this is to allocate different amounts of money to multiple crypto tokens. By doing this, we are spreading our risk across several assets.
Another reason to assign different amounts of money to individual crypto tokens is that they all have other price points. By investing in various assets, you are giving yourself the best chance to make a profit. For example, one Bitcoin is worth around $40,000, while one Ethereum is worth approximately $3,000 currently. If we only invested in Bitcoin, we would be missing out on the potential gains that Ethereum could provide. By investing in both Bitcoin and Ethereum, we are giving ourselves the chance to profit from the price movements of both tokens.
Here are a few things to keep in mind when picking crypto tokens:
The market cap of your selected coin or token
The market cap of a coin or token is the total value of all the coins or tokens in circulation. Investors can use it to measure the relative size of a currency or token.
It can be a good indicator of its popularity or usefulness. For example, a high market cap can indicate that many people use or buy a coin or token. Conversely, a low market cap can mean that a coin or token is not immensely popular or not particularly useful. The market cap of a coin or token can also be a good indicator of its risk. A high market cap can indicate that a coin or token is more stable and less risky. Conversely, a low Market Cap can tell that a coin or token is more volatile and riskier.
The project’s roadmap & tokenomics
Another essential thing to look at is the project’s roadmap. The roadmap will give you an idea of what the team plans to achieve and when. Tokenomics is an essential aspect of any project, and it’s important to understand how the project’s tokens will be used.
The Consensus Algorithm
A good approach for those newer investors is looking for coins with more safety features built into their tech. In addition, they should consider coins that earn money through more than just price appreciation, like dApp tokens or crypto collectibles.
The project’s tokenomics
A consensus algorithm is a computer protocol used to verify and agree upon the ordering of events and transactions in a distributed system, such as a blockchain. It makes a central authority obsolete. Different consensus algorithms might do better in other conditions. Finally, make sure the algorithm supports near instantaneously scaling.
The project’s community
Finally, take a look at the project’s community. A solid and supportive community can be a great indicator of a project’s success.
The team behind the project
Finally, before investing in any project, it’s essential to do your research and make sure you’re comfortable with the team behind it. Look at experience, track record, and vision for the project.
By keeping these things in mind, you’ll be able to pick the suitable crypto tokens to invest in, and you’ll be on your way to success.
Investing Cryptocurrencies: Avoiding FOMO & Losing Your Shirt
FOMO, or the fear of missing out, is a common trap for investors. It can lead to impulsive decisions and bad investments when investing in cryptocurrencies. The key is to avoid FOMO and make investment decisions based on your research and long-term outlook.
Last but not least, don’t lose your shirt. In other words: don’t invest more money than you can afford to lose. Cryptocurrencies are a volatile market, so there is always a risk of losing money. Therefore, only invest what you can afford to lose, and never invest more than you can afford to lose.
If you have made it this far, you are well on your way to accumulating a diverse portfolio. Keep in mind that nothing is guaranteed, but any crypto investor can form a well-rounded crypto portfolio with the help of research and dedication.
Manage your portfolio with Cryptohopper
Manage your complete portfolio with Cryptohopper, all from one place. Did you know that the basic functionality of Cryptohopper is actually free? Our Pioneer package offers free manual trading. Connect all your exchanges by creating Hoppers and linking them to your exchange accounts.
Originally published at https://www.cryptohopper.com.