Your investment strategy will guide your portfolio. And similar to purchasing something new like an automobile, you first look and study the different models and makes to identify which one suits your requirements best. And just like autos, the options before you are endless when assembling a Cryptocurrency portfolio. The level of due diligence you will need is similar to when you are considering investing in other financial asset classes.
Although it all depends on your particular expectations regarding the assets and coins to include in your portfolio, below, we look at several Cryptocurrency trading pointers that will give you a head start as you venture into the fast-paced cryptocurrency trading field.
1. Understand Cryptocurrency Basics
The fact that you are perhaps only making a small investment or financial allocation to a cryptocurrency like Bitcoin doesn’t mean homework is not needed on your part before you buy or invest. You should first endeavor to understand and apply the basic principles of digital assets and blockchain technology. When entering into the crypto trading arena, the venture should be approached with a long-term mentality. At the same time, expect to face market volatility, including potentially making a 100% loss.
When creating your 2021 crypto portfolio, research meticulously. Learn as much as possible about the team behind the virtual coin before you invest. Before making your final Cryptocurrency trading decision, make sure you understand its purpose. However, always remember that not all crypto coins will stay at the top in ranking for long as shifts are expected. Be prepared for market volatility.
A cryptocurrency portfolio with a diverse market cap should have a couple of high market cap coins, medium market cap coins, and low market cap coins. The diversity helps you plan for both short and long term growth without exposing yourself to too much risk. It’s common, for example, to see portfolios split at 50% (high), 30% (medium), and 20% (low) market cap coins, respectively. However, identifying the differences between the coins is a daunting experience, and the professional services of a reputable Cryptocurrency broker help a lot.
Without a strong community, the coin is unlikely to succeed. This, however, doesn’t mean there will always be a strong community behind a crypto that is currently rising. But that there needs to be an ongoing evaluation of the trend around the community supporting the coin. As a coin is growing in market cap, presumably, the community involvement should also be increasing. The level of involvement on technical discussion boards, forums, and social media should give you an idea of how the community is engaging and where the particular coin is performing.
Today, besides coins such as Litecoin (LTC), Ethereum (ETH), and Bitcoin Cash (BCH), over a thousand cryptocurrencies are being traded on major international cryptocurrency exchanges. As the industry matures, if you are to make profits, it’s essential to position yourself strategically. If you want to succeed in the crypto industry, creating a Cryptocurrency trading portfolio should be among your first steps.