To start this post: How to Structure a Crypto Portfolio, it is important to know that nothing in this post can or should be considered financial advice or consulting. Simply one person’s opinion on crypto portfolios and the future of digital assets. With that being said, let’s dive into it.
Time to Enter
Moving away from the bear market of 2018, it is a great time to set up your crypto portfolio. Hopefully you have already done so when the market dipped, but if you have not here are some tips on how to do it.
Setting Up a Crypto Portfolio
To begin, we are going to need a few things:
- Coinbase account: to convert your fiat into crypto and vice versa
- Binance account: to trade for different digital assets
- Cold wallet storage: to protect your digital assets from hackers
- CryptoPanic: to keep up with all the most relevant news on the market
- CoinMarketCap: To keep track of every asset in the market and get sad when yours is not the top surging coin
- 3Commas: For trading and setting stop limits on your assets.
We are not going to cover each of these items in this article, but you can find these topics covered in other articles on the site.
Choose an Investment Game Plan
Before you even start purchasing cryptocurrency, it is important to do your due diligence and map our your investment strategy. You will want to diversify your portfolio across the market investing in 5-10 different assets. A great strategy is to invest in:
- 4 top ten digital assets representing 50-60% of your entire portfolio
- 3 top 100 digital assets representing 20-30% of your portfolio
- One to two fun assets or ICOs or simply hold some reserves in Bitcoin or a stable coin
If you are very risk-adverse then you may want to increase the weight of your portfolio by purchasing more top 10 digital assets. These assets like Bitcoin, Ethereum, Ripple, EOS, Bitcoin Cash, Cardano, Litecoin and other similar top assets are the least risky investments. There is several years of data backing up the price of most of the assets and they each will have a substantial amount of liquidity for easy exits.
Additionally, it is important to note that investing in most of these top assets will naturally diversify your portfolio. This is due to the nature of most of the top assets representing different markets, use-cases, and purposes. For instance, Bitcoin is a digital currency that has the largest node network in the world which makes storing data and holding reserves extremely secure. Ethereum on the other hand is a platform based cryptocurrrency with an application layer for decentralized applications. Furthermore, Ripple aims to disrupt the financial industry through products offered by its parent company.
Top Market Assets
Likewise, most of the other top assets will offer some exclusive code base, purpose or market need.
- Bitcoin – Grandfather of cryptocurrency with largest node network, largest adoption rate/exposure base and most widely used digital currency
- Ethereum – Decentralized application platform written with proprietary code base, Solidity. Trading pairs across most exchanges
- Ripple – Cryptocurrency with fee-less near instant transfers. Aims to disrupt the financial banking giant SWIFT
- Bitcoin Cash – Another community of Bitcoin minimalists with different ideas on how the underlying code base should run
- Litecoin – The silver to bitcoin’s gold. Plans to implement anonymous transactions moving forward
- EOS – Similar to Ethereum except written on C and boasts different partnerships, road map and early implementation of proof of staking consensus
- Binance Coin – Exchange based coin that now has its own blockchain. Value of this token heavily will depend on the success of the worlds largest exchange Binance
- Tron – Also similar to Ethereum and EOS except heavily targeting the gaming industry with partnerships like Blizzard. CEO loves to promote this project
- Stellar – Similar to Ripple except the fundamentals are different. Airdropped all tokens and aims to be better than Ripple.
- Cardano – Formal verification driven blockchain with smart contracts similar to Ethereum. Written on a functional based language Haskell
- Monero – One of the original anonymous based cryptocurrency utilizing a protocol called zK-SNARKs
Each of these assets can be obtained from either Coinbase or Binance which is why these two exchanges are critical to setting up your crypto portfolio.
If you do not mind risk, then you will want to keep reserves on the exchange where you will be trading to try and time the market for bullruns/shorts.
Fiat to Crypto
The standard method for investing into the crypto scene is to dollar cost average in or DCA. For instance, if you wanted to invest $10,000 into crypto currency you would want to spread out this investment over a period of several weeks or months if you have the patience. The price of crypto is extremely volatile and it is best to invest your assets on days where the market is red or decreasing in value.
Moving Funds off Exchange
After each purchase, it is important to decide if you want to keep your funds on the exchange for accessibility, or if security is your number one priority. These days most investors do both approaches depending on how active they are with their funds. The most secure way to protect your funds is to move then to cold storage with a hardware wallet. The Ledger Nano is the most popular wallet, but there are multiple wallets on the market.
Now that you have your portfolio set up, how long do you wait? Typically, the market goes in 3 to 4 year cycles. With the last cycle ending in 2017 and early 2018, we are projecting the next bullrun to happen between 2021 and 2022. Regardless, it is best practice to plan on sitting on your investment for 3 to 5 years for maximum maturity. At that point, the market will be increasingly different and there could possibly be better indicators, price predictions, and stability.
Now that you are locked in for the ride, it is best to almost forget about your investment. The crypto market is an extremely emotional winding market with many dramatic circumstances. The news will twist the facts, the exchanges will get hacked periodically, and people will lose their mind.
Understand that this is normal and should be expected. Learn to laugh at the world, market cycles and FUD and you will be just fine. Above all else, Hodl and believe in your due diligence. For everything else there’s stop losses.