How to Diversify Your Crypto Portfolio

Cryptocurrency has become one of the leading financial markets in the world, with over 5000 coins listed on trading platforms and billions being traded daily. 

Holding a diverse portfolio increases your chances of success in the crypto market. A lot of coins tend to move with the rise and fall of major coins like Ethereum and Bitcoin(Bitcoin wallet recovery). However, many people miss these movements because they stake just one currency.

What is a Diverse Portfolio?

Simply put, diversifying your crypto portfolio means placing money in multiple assets to trade or stake and HODL for the long-term. The size of your investment helps to determine how many cryptocurrencies you can buy. With a small wallet, 2 to 4 assets are advisable, while for larger wallets, five or more can be held.

Different cryptocurrencies in a circle with a golden bitcoin in the middle. Different cryptocurrencies concept. 3D illustration

Why Hold Multiple Assets?

Holding multiple assets helps you to be able to withstand cryptocurrency crashes, for example, the  Bitcoin downtrend of 2018. It also helps you to be able to earn a lot when small assets spike, like the sudden appreciation of Ethereum, YFI, etc.

By holding multiple assets, you are prepared to handle losses and unexpected gains as well.

How to Diversify Your Portfolio

Cryptocurrency diversification depends on certain factors. It would be best to consider them when trying to create a diverse portfolio, so you don’t go in too hard and come out empty-handed.

Firstly, when considering cryptocurrency diversification, you need to look into their whitepaper. The whitepaper of a cryptocurrency can help you determine what it stands for and how authentic a coin it is. This provides you with information about the type of coin it is and what it is being used for. 

When you understand what it is used for, you can research and determine if it will have long-standing importance and be a viable investment option. 

Secondly, you can diversify your portfolio based on geographical data; this means that you buy coins from different places and continents. With this kind of diversification, you can stake coins from different countries and hold them. So no matter the cryptocurrency situation in whatever country you live in, you can be sure you’re gaining from your other assets.

You need to look into their volatility, how their trends work, the initial coin value, and how much it has appreciated so far. This information helps you determine whether it is a viable investment or you need to steer clear. It can also help you find out more about how the coin is moved by social media and cryptocurrency whales. 

Finally, you can gradually increase the value of your portfolio; this means that you treat your cryptocurrency diversification like saving at a bank. You gradually increase the number of assets over time and can also increase the amount of money placed in these assets. This is the best option for holding long-term.

To get the most out of cryptocurrency, you need to pay close attention to the market and keep tabs on the prices of coins. Cryptocurrency, like every other investment, requires risk to gain rewards, so by investing correctly and having a diverse profile, your chances of getting rewarded improve a lot.

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