Proper Way Of Building a Crypto Portfolio
I get asked on occasion, what are the best digital assets to purchase?
Should I buy Bitcoin?
How much should I buy?
Then people always want to know my opinion on what the price Bitcoin will be during the next bullrun. The endless questions are silly and it is always fun to speculate. Although, how much Bitcoin should you purchase? In fact, how should you structure a crypto portfolio all together?
That is what we are going to be diving into today on the Tribe. Lets discuss how to go about building a crypto portfolio!
Nothing should be considered investment or financial advice. Enjoy the ride.
Building a Crypto Portfolio
First and foremost, you need to have some basic knowledge about cryptocurrencies in general. If you do not have the basics down then please click on that link and go learn about some of the most popular projects on the market, basic crypto tech, and the best place to purchase crypto.
If you do have the basics down – then please go ahead and keep reading.
Building a crypto portfolio should be similar to building a portfolio in the traditional world. You want to maximize return and reduce risk.
Therefore, you will want to purchase a set amount of certain digital assets that are least risky, followed by some that are a little bit more, and then maybe gamble on a few others that could potentially have massive returns. This would be similar to a traditional portfolio.
This is a typical portfolio. The smartest position in my opinion, is betting on the big dogs in crypto. Especially in the digital space since we have seen year after year projects with huge potential fail to replace any of the foundational projects that have stood the test of time.
For those reasons, lets talk about the first projects that should make up the brunt of your portfolio and hold the largest percentage of it – the OGs.
Start With the Top Assets
If you’re educated in crypto, you will know that there are three top dogs in this space.
Without a doubt and without thinking, these three assets should have come to mind:
- Bitcoin
- Ethereum
- Ripple
Each of these projects has foundationally revolutionized the digital asset industry and clearly stood the test of time.
These are the top three projects on the market and for good reason. For anyone that is building a crypto portfolio, I would highly recommend to make between 60% – 80% of your portfolio composed of these three assets alone.
Compound Interest
Although, you might want to also consider that currently Blockfi is offering interest accounts for Ethereum and Bitcoin. Which means, you can hold your ETH and BTC in one of their interest accounts and passively collect more digital assets overtime without doing anything. So, not only will you be holding appreciating assets, but you will be getting more Bitcoin and Ethereum all the while, furthering your growth potential.
Now, Ripple or XRP is not a bad hold either. The main problem with Ripple, is that the parent company is constantly selling hundreds of millions worth of the asset on the market diluting the impact of the growing market.
You could argue and say that the mining and delayed time release of ETH and BTC are technically doing this as well, but it is slightly different. The mining operations are creating another need and industry all together further solidifying the market. While the sell off of pre-mined assets essentially is really only hindering the investors.
Ripple is selling XRP to fund development, but it is still frustrating. These are just aspects to keep in mind before your decide which 2 of the three top assets you want to on in on.
Portfolio Split Out
Now if you have read and agreed with putting most of your portfolio in those top three assets, then what about the rest of it? Well, I would highly recommend that people looking to bridge into other cryptos stay invested in the top 25 assets only.
Anything past the top 25 is probably going to be extremely volatile and unpredictable. Not to mention that as the market cap decreases and the exposure of projects drops, the chance for a scam gets high and higher. For those reasons, stick with researching the most well known and developed projects.
Just like in the traditional market, you probably are going to want to aim for projects that are cash flow positive, and lack debt. With a few quick Google searches, you can probably weed out a few of the projects and focus in on a some that look promising.
I would probably only invest 30%-40% of your portfolio in these higher risk assets. Really, it should be much less, but you can make that call.
If you need a list of assets to kick off your search, here are a few that I can confirm are real, have plenty of funding, and great potential for success down the line:
Keep Researching
I would say, you should be able to effectively construct a decent crypto portfolio out of the three top assets and the six digital assets listed above.
I doubt there are many people even in the crypto community that would argue with this setup. Now, there are those that are heavy hitters for one specific project, but in reality that is a horrible way to invest. Never put all of your eggs in one basket, but then again never spread it out too far to be effective. I would stick to picking 5 in total to invest in with 2 out of the 5 being from the top 3.
Most importantly, never stop researching even after you have created your portfolio. I have shuffled around my crypto portfolio probably 10 times in the past 4 years as certain projects grew or died off. It really is a never ending process of research, invest, test, wait, research, re-invest.
There is no magic formula in this market. There is no golden rule, but there is this truth.
Crypto is here to stay. There will not only be one winner either out of the market. Just like in the real world, there will be multiple currencies used, multiple projects succeed, and plenty of winners.
Sadly, with every winner, there will probably be a thousand losers. Stay with the strong assets, don’t shoot for the long shot 200th place crypto and lose all of your money. Consistency is key with investing.
