What’s a Crypto Portfolio and Why should it be Diversified?

Being a part of the crypto community allows you to interact with many people and advise them on whether or not to invest in a particular project. However, simply seeking investment advice or expert opinions is not always feasible. We’ve discussed some simple ways to achieve your crypto investment goals with the help of an effective portfolio diversification strategy below. But, first and foremost, let us define what a crypto portfolio is.

What precisely is a cryptocurrency portfolio?

Simply put, your cryptocurrency portfolio consists of all of the coins and tokens you own. For example, if you own ten different assets such as Bitcoin, ETH, DOGE, USDT, and so on, your portfolio is made up of those specific assets. The value of your portfolio is entirely determined by the current market price of all the cryptocurrencies you own.

If you are new to cryptocurrency investing, chances are you will only have one asset in your portfolio at first. As you start investing in more cryptocurrencies, your portfolio will become more diverse.

Why should you diversify your cryptocurrency portfolio?

Beginners who have just begun investing in cryptocurrency have a common misconception. Many of them believe that simply owning a small amount of Bitcoin will make them millionaires in the future. Yes, investing in Bitcoin can be a good place to start. However, you must also consider the fact that the crypto ecosystem is far larger than Bitcoin.

There was a time when Bitcoin investors were overjoyed. Bitcoin’s value skyrocketed like never before in early 2021, with the world’s largest cryptocurrency by market cap reaching its all-time high of $65,000 in April. Following that, the market took a dive. The market was jolted by a sharp drop, which was followed by discussions about Bitcoin’s energy consumption.

The key to success is diversity.

Diversity is one of the most significant advantages of a well-balanced crypto portfolio. If you continue to hold Bitcoin, for example, you will be subject to extreme ups and downs. As an investor, it is critical that your cryptocurrency portfolio and crypto tax include altcoins, especially if you do not want to be subjected to market mood’ swings caused by Bitcoin’s extreme volatility at times.

Always keep your eyes peeled.

The future isn’t always as certain as we would like. In fact, the opposite is true. When you have a diverse portfolio, you have a better chance of selecting an asset that you believe will outperform Bitcoin in the future.

While there is no guarantee that this will be the case, you will be willing to take a chance on other coins and tokens. You should, however, always conduct research on various cryptocurrencies and look for projects that can solve real-world problems.

Rebalance your cryptocurrency portfolio.

With a diversified crypto portfolio, you have more freedom to rebalance your portfolio using the gains from your outperforming asset.

Crypto portfolio management and crypto portfolio tracker does not have to be difficult with the help of Binocs. However, it is critical to have a firm plan in place for how much you want to invest and in what assets. 

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