Asset Allocation In The Cryptocurrency Market
By Blockbuster Blockchain on ALTCOIN MAGAZINE
Investors are advised only to invest the amount that they can afford to lose. This applies even more to the cryptocurrency market because it is far more volatile than almost any securities. Cryptocurrency values can easily multiply, but they can also halve quickly despite potential intrinsic value. Therefore, while investors should only invest in what they can afford to lose, they must do their due diligence and do proper asset allocation to ensure a constant winning in the cryptocurrency market.
Cryptocurrency due diligence is composed of three pillars: technical analysis, whitepaper, and hype. Technical analysis allows investors to decide an entry/exit point in a purchase or trade. Whitepapers provide the foundation to conduct fundamental analysis. Hype and news often can root from a large pump & dump scheme, but there are reasons when the public goes wild about an asset. As there is a lot of information online from many blogs, websites, content creators, investors can learn more about the market, but the quality of contents are not guaranteed.
The strategy I will introduce to you does not recommend any particular coins to invest in or show you an easy way of making money. However, it will help you to grow as a disciplined investor or trader. By learning the basics of asset allocation, you can always lose the emotional attachment to an investment.
Asset allocation simply means a method of how your assets are divided up into different investments. Usually, when people regard asset allocation strategies when making an investment portfolio, the different asset classes are usually real estate, stocks, and bonds. Portfolio percentages are established based on risk tolerance. For example, 20% of your investments towards S&P 500, 20% of your investments on stock, and 20% of your investments on savings. As the volatility in the market does not allow for investors to implement traditional asset allocation strategies based on risk tolerance, there are different ways to accomplish this.
For instance, 30% of assets into swing trading and day-trading, 20% of assets into major cryptocurrencies such as BTC, XRP, 40% of assets into cryptocurrencies with technical value such as XVG, and 10% of assets into hyped projects like TRX. However, sometimes the best cryptocurrency projects with a strong technical foundation may have a huge dip in the market. This is why access to unbiased information and personal flexibility are essential in creating a successful cryptocurrency portfolio. You first need the accurate, unbiased information and conduct personal analysis and judgment. Secondly, you need to have the willingness to set a stop-loss and accept the possibility of your portfolio declining in value.
By having a personal strategy in allocating assets into different cryptocurrencies, success will come in time. Through my upcoming articles, you can learn more about how to develop your personal strategy.
Writer: Yunsoo Kim
Re-(E)Think, COO | RichValley, Inc. Director | Yale NUS ’23
