Bitcoin and altcoins like Ethereum, Solana, Polkadot have been among the most sorted-after portfolio items in investors’ portfolios. It is also noteworthy to point out that virtual digital assets have been among the best-performing assets in 2021. With more traders and investors jumping into the crypto market to capture the growth from these crypto tokens, that crypto space has the potential to an even wider mass adoption in the long run.
Apart from the growing interest of the Indian masses in the crypto space, it is imperative to remember the volatile nature of the crypto market. At its core, investing in digital assets is not very different than investing in stocks and bonds.
6 Best Fundamentals of Crypto Investing Strategy
Now that we have taken a walk down the basics of crypto investing and how it works, it is very important to decide on a fundamental strategy before diving into the new digital asset!
- Choose the right mix of storage wallets: To keep your tokens 100% secure, divide your tokens between hot wallets (digital wallets) and cold wallets (offline or hard drive).
- Liquidate your assets: As volatile as the crypto markets are, crypto experts often mention keeping tabs on the crypto market to analyze the market trends and liquidate your assets accordingly.
- Track Volatility: As much as the volatile market makes ways for liquidating your profits, it also acts as a pathway for more researched buying! The up and down in the crypto market is a healthy sign and the ‘dips’ are often referred to as the perfect time to acquire high-end tokens.
- Make sure to check you can afford to lose your investment: Taking advantage of the volatility of the crypto market is smart, but it is also crucial for any trader to take note of affordability. If you are not comfortable with withstanding the potential full loss of your investment, that means you cannot afford the risk of investing the amount you are considering.
- Diversification: Even though your interest lies in investing in the new asset class, it is important to make sure you acquire small parts of a few tokens. Make a note of deterring from putting all your budget in one asset only.
- Dollar-cost averaging, or DCA: This method entails putting in small portions on your total budget in your choice of tokens rather than using up your whole budget at one go.
Take advantage of Rupee Cost Averaging & Compounding with Crypto Investment Plan by CoinDCX
How Crypto Investing Works
If you are new to crypto, the above section will be even easier to comprehend once you take a note of how crypto investing works. We have compiled a list of pointers just for you!
- Choose a crypto investment platform of your choice
- Create an account
- Transfer fiat funds to your crypto exchange wallet
- Choose the crypto assets that you want to add to your portfolio
- Complete your transaction
- Store your crypto in the digital wallet
WHY SHOULD YOU DIVERSIFY YOUR CRYPTO PORTFOLIO?
The main aim of making one’s crypto portfolio diverse remains the same as to why one should diversify one’s portfolio as a whole. While drawing a tentative conclusion regarding the crypto market is close to impossible, making a wise choice of investing in various cryptocurrencies and making a diversified crypto portfolio keeps it impact-ready.
The importance of cryptocurrency diversification is made evident as it reduces the risk of permanent loss, in a scenario where one of the assets within the crypto portfolio might crash but the other assets may be holding their value or experience an all-time high or a profit. All in all, the various assets together put the portfolio in a better place.
Diversifying Crypto Portfolio within Different Blockchain Protocol
Diversification of a portfolio is basically equivalent to having a filling meal with all your proteins. While mentioning diversification it is important to remember that the total amount you are going to bet should be the amount you are comfortable incurring the loss of. Diversifying the crypto portfolio is an act of investing your money in various crypto projects rather than putting in all the budgeted amounts in one single asset.
For example, if your total budget for investing in digital assets is ₹10,000; you can divide 30% of the amount in between the most common tokens, BTC and ETH while you can divide the rest of your budget in various altcoins and metaverse coins, as per your preference. That reduces the risk of incurring a huge loss if one or more projects perform poorly, a common occurrence given the volatile nature of the crypto space. Implementing a diversification strategy into your budget allocations on various projects also allows you to achieve the best possible returns even when some of the portfolio items perform poorly.
Investing in NFTs
NFTs are the new craze in the crypto world. The possibility of any form of digital art to become a unique token that holds a place in any one portfolio within the entire crypto domain is as exciting as it sounds! Here are the top 5 NFT tokens to look out for
|NFT Tokens||Market Cap*|
|Axie Infinity (AXS)||$4,323,222,882|
|The Sandbox (SAND)||$3,894,308,587|
|Theta Network (THETA)||$3,276,520,549|
*Market Cap as of 25 March 2022.
Additional Read: How to buy an NFT – Step by Step Guide
Investing in DeFi
DeFi also known as Decentralised Finance are decentralized application that run on smart contracts. Their main aim is to transform the traditional ways of finance with the help of crypto assets. Investing in DeFi requires you to open an account in any of the crypto exchanges available. Here are the top 5 DeFi tokens to look out for
|DeFi Tokens||Market Cap*|
|Wrapped Bitcoin (WBTC)||$12,085,032,363|
*Market Cap as of 25 March 2022.
Additional Read: Total Value Locked in DeFi Explained
Investing in Crypto Investment Plan or CIP
Sounds a lot like systematic investments in mutual funds? Yes, it does. Similar to how you can explore mutual funds, the crypto space now has a CIP or Crypto Investment Plan that gives you various options for periodic investments in Bitcoin, Ethereum, and many other crypto tokens. Check out CoinDCX, crypto investment app here to check if you spot your favorite coin.
Crypto Portfolio Trackers:
Keeping tabs on your choice of crypto via a portfolio tracker will allow you to trace the movements of your assets. You can keep a close eye on how your current allocation stacks are performing and work on long-term crypto portfolio goals and track your progress. Mentioned below are some of the crypto trackers you can explore:
- Coin Market Manager
- Crypto Pro
Even though the crypto market is risky, investors are nonetheless attracted to the potential upside of crypto. If you decide to diversify your portfolio while including the crypto tokens, it is important to carefully research any digital coin before buying it. There are already thousands of crypto projects available in the market right now and newer tokens are still being worked upon. This means that despite the overall volatile aspect of the crypto market, it is possible to curate a balanced crypto portfolio that is suited to your goals, time frame, and risk tolerance. Make sure to DYOR (Do Your Own Research) and keep tabs on your choice of crypto tokens before diving into acquiring.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. In case you have any queries, write to [email protected].
The above information represent the independent views of Primestack Pte. Ltd, Neblio Technologies Pvt. Ltd, and/or their affiliate entities and are for informational & educational purposes only. The content, information or data provided above is not an offer, or solicitation of an offer, to invest in, or to buy or sell any interest or shares, virtual digital assets/ crypto products or securities, or to participate in any investment or trading strategy. Any statement or communication made above shall not be treated as a legal, financial, investment or tax advice by the reader. The calculations, data, risk-return formulations, performance or market capitalization indicators captured above are based on the independent data sourcing including collation of public information and/or analysis performed by analysts, advisors or employees of Primestack Pte. Ltd/ Neblio Technologies Pvt. Ltd and/or their affiliate companies and/or any third party. Past performance is not indicative of any future results. The reader(s) are hereby advised to consult their financial/ legal/ tax advisor(s) before making any investment.