Crypto traders wade through the internet looking for the right portfolio building strategy. A well designed and balanced cryptocurrency portfolio ensures high returns for traders. We have compiled a thoroughly researched list of tips on building a cryptocurrency portfolio. This list is designed as a starter guide for crypto traders for building the most competitive cryptocurrency portfolio.
Conduct thorough research on circulation
The first thing to check for a coin is the market cap. This gives an idea of how the value of the coin will change in the future. Circulation and supply changes over the next few years and grows faster than 10% per year. This also means that the price would decrease, this helps generate a rough growth expectation for the coin.
Diversify based on Market Cap
When diversifying your portfolio, it is advisable to select coins with varying market cap. A portfolio with the varying market cap would include mid-cap, small-cap and large-cap coins. The standard division is 50, 30 and 20 split between large, mid and small-cap coins. This would give great short term and long term growth without taking on too much risk. The best coins to consider are the top 10 as the large market cap, next 20 in mid-cap and remaining small-cap.
Circulation Supply
While checking out circulating supply, there are several key elements to consider. The rate at which new coins are being introduced, the portion of total supply being circulated in the market and future dilution in the market. The faster new coins are brought into circulation, the more difficult it will be for the price of the coin to go up.
Total Supply
While total supply generally goes hand in hand with circulation supply. If the total supply is larger then, this could indicate that as the circulation supply expands, the price may remain stable as new coins are being introduced. This value can help you understand the long term potential value of the coin. The higher the total supply, the more impact a small change in value will have on the market cap in the future.
Technology and coin project
While there are several varieties of coins in the market, coins can be divided based on their advantages and disadvantages. There are different mining hash algorithms such as SHA256, Scrypt, and X11 and different proof systems such as proof of work, proof of stake, and proof of activity. These factors in cryptocurrencies affect the ability of a cryptocurrency to be adopted in the market. When building a diverse portfolio, it is important to remember that your choice of coins can drastically impact your investments.
Investing and trading in cryptocurrencies is a continuous process and while you adopt these tips and incorporate them in your portfolio, it will take at least two weeks before it starts showing returns. As the crypto industry matures, there will be new technologies and opportunities that arise constantly. It is okay to change strategies if they don’t work, there are several resources available for tracking and managing your portfolio.
