Newbie investors often think that it is worth buying a few promising cryptocurrencies and in a couple of years you will be rich. But in fact, if you collect coins at random in a portfolio, you can not only earn nothing, but also lose all the money. Not every cryptocurrency will make a profit. But buying only bitcoin is not the best strategy. After all, the market is full of projects that rise in price dozens of times a year.
Today, together with buidlbee, we will tell you how to choose the right crypto assets for investment, how much to invest in bitcoin, and what investment strategy to choose.
Cryptocurrency has a huge potential for earning, but you should try your hand at the market gradually and very carefully. Cryptocurrency prices are still volatile and vulnerable to speculation despite some improvements in the last decade.
What is a cryptocurrency portfolio
A cryptocurrency portfolio is a set of digital assets in which an investor has invested. Compiling such a portfolio, he distributes funds between coins, tokens, stablecoins, NFTs and other assets of the crypto market.
For example, you have free money. Instead of keeping them in a bank account, you bought BTC, ETH, LTC, ADA or UMI with them. Now it is not just free money, but a real cryptocurrency portfolio.
A cryptocurrency portfolio can be part of an investment portfolio – a set of various financial instruments and assets in which an investor has invested. Such assets may include a bank deposit, stocks, real estate, or cryptocurrencies.
Building a well-balanced portfolio is not easy. It is necessary to take into account all the risks, determine the desired level of profitability and choose investment strategies. At the same time, you cannot simply copy the portfolio of a successful investor or trader. After all, all players in the crypto market have different goals, risk tolerance and investment horizon. It is better for beginners to compile a crypto portfolio on their own and, as they gain new knowledge, analyze the market situation and form new goals, gradually improve it: reduce risks and achieve greater profitability.
How much to invest
The ideal amount to invest in cryptocurrencies largely depends on the risk appetite and ability to cover losses. Most asset managers who work with cryptocurrencies on behalf of clients recommend investing a moderate amount of funds, for example, 0.5-1% of the total portfolio.
If you are risk-averse, we recommend you to start small and regularly buy a certain amount of cryptocurrency until you accumulate enough crypto assets to reach your goal. This way of investing in cryptocurrencies, which is called dollar value averaging, reduces the chances of buying at the peak of market value.
In addition, knowledge of the cryptosphere and familiarity with the best practices in the industry are of great importance for managing the risks associated with the volatility of this class of assets.
The ideal starting point is to hold up to 1% of your assets in cryptocurrencies and the rest 99% in more conventional assets. However, you can gradually devote more money to such an investment as you gain experience in the crypto field.
But again, don’t go over 5% right now. The cryptocurrency market is still too young to guarantee a larger share in the investment portfolio.
What to buy to access cryptocurrency
An account on leading crypto exchanges (such as Binance) and buying bitcoin is the easiest and fastest way to access cryptocurrencies. You can also choose another famous trading platform like eToro or Robinhood.
When buying Bitcoin on Binance for $1,000, the investor pays a commission of about a dollar. If he pays the fee with the platform’s native BNB token, he gets a discount. You can pay for the operation in foreign currency using a debit card or bank transfer. When buying cryptocurrencies on traditional trading platforms such as Robinhood, the transaction usually takes place through intermediaries.
Another way to gain access to cryptocurrencies is to buy shares of crypto companies, trusts and other funds that invest in crypto. Grayscale Investments LLC owns almost 650,000 BTC and allows investors to trade their shares in the same way as a simple public asset. The trust fund charges an annual fee of 2% and may use a premium or discount to the value of bitcoin on the balance when trading.
Conclusion
The crypto industry is growing very fast, and many experts agree that the adoption of cryptocurrencies will only increase over time.
The recognition will have a positive impact on value and the crypto industry will receive more capital in the future. And yet, those who are brave enough and ready to try themselves in this business should remember that increasing profits largely depends on the constant study of the cryptocurrency market and schemes for making money on them.
