How to Diversify Your Crypto Portfolio + Example Portfolios

Bybit is the best and most trusted crypto futures exchange that offers 400+ trading pairs and up to 100x leverage. Their platform is licensed, regulated and has industry leading fees on futures and derivatives contracts. For example, the value of Bitcoin dropped by over 80% in 2018, resulting in huge losses for many investors who needed to diversify their portfolios. Relates to the distribution of your investment funds across different assets or sectors. For example, you could diversify your stock holdings by investing in different industries, such as agriculture, technology, energy, and healthcare. As a new asset class, cryptocurrencies do not have the same analytical tools as traditional investments such as stocks.

Although its derivative trading fees are on the higher side, it is one of the oldest in the market and offers high liquidity. The platform is friendly for beginners and offers paper trading for you to practice derivative trading. These are perpetual contracts that are settled in cryptocurrency, such as ETH, BTC, etc. In total, the platform offers 17 perpetual and 84 futures contracts. Deribit’s interface appeals to a newcomer and serves as a powerful tool for veterans.

Investing vs Trading

It is common for the price of Bitcoin to experience a 50% drop in a matter of days. In such instances, investors who are heavily invested in the Bitcoin market would see a sudden crash in the value of their portfolio. For instance, a stock portfolio should embody multiple segments of the stock market, including energy stocks, tech stocks, healthcare stocks and so on. Savvy and sophisticated traders and investors have been taking advantage of leverage to trade stocks or gold for quite some time. The easiest and perhaps most effective way of diversifying a portfolio is to invest in dozens of different projects.

Do your own research before investing in any cryptocurrency project, and always invest what you can afford to loose. However, this website is readers supported, and it’s free for you to use, but we include link to products or services we think are useful to you. If you make use of these third-party links, we may receive some commission at no extra cost to you. If you’re a long-term investor, you need to devise a definite plan for diversifying your crypto portfolio. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances.

With that being said, let’s look at a few random crypto portfolios in terms of conservativeness. Bear in mind that ‘altcoins’ here represent a basket of many various cryptocurrencies that have some degree of real-world utility. Using US Dollar stablecoins like USDC and Tether all but eliminates diversified crypto portfolio the underlying volatility present in most crypto assets. DeFi allows investors to earn a yield on their crypto and should be considered when diversifying a crypto portfolio. Keeping a long-term perspective, meaning years and decades, is the key to managing your crypto portfolio.

Cryptocurrencies and blockchain will change human life in inconceivable ways and I am here to empower people to understand this new ecosystem so that they can use it for their benefit. You will find me reading about cryptonomics and eating if I am not doing anything else. So, if you are looking for a single recommendation, I suggest you go for the ByBit exchange, though there are other platforms.

Types of Coins to Diversify Your Crypto Portfolio & Manage Risks

And to lose your investment… While some have success with low/micro-cap gems, most of these projects never make it off the ground. Outside of huge bull runs, they are a long-shot that may produce massive gains. There is no such thing as the perfect portfolio or trading strategy – everyone has different investment goals & risk tolerances – it’s about finding the one that suits you. Diversifying your crypto portfolio requires you to invest across different crypto sectors, blockchain ecosystems, and coins.

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  • Schwab-Pomerantz also offered her views on crypto investing and artificial intelligence—and supporting Ukraine in a time of war.
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Different crypto projects have varying bases and technology powering them. This gives you the option to pick those in line with your investment goal. But as a serious investor, having one or two cryptocurrencies in your portfolio is not enough. Sure the coins will earn you huge rewards when they move in the positive direction, but what happens when they both move the other direction? This is precisely why you need to diversify your portfolio to include other cryptos. Cryptocurrencies are lucrative investment options, no doubt about that.

What are crypto derivatives?

Another factor to bear in mind is that there are now more than 21,000 cryptocurrencies listed on CoinMarketCap. On the contrary, it is wise to consider investing in other asset classes entirely, such as stocks, ETFs, or precious metals. The fact is, however, that within each niche, there are many crypto assets competing for their share of the respective market. Nonetheless, there are a number of core strategies that can be undertaken when building a balanced crypto portfolio, which we discuss in more detail in the sections below. Points are determined by the real-world performance of each sports player from within the selected team.

As long as that stock continues to underperform , you can continue to drive income without being forced to sell your long-term stocks. But if for some reason they start performing well and you’re forced to sell them, you’ve still collected some cash payments, and you can always buy those stocks again. True long-term investors can afford to ignore cyclical setbacks for stocks. A well-diversified mix of holdings can stave off shocks to your portfolio’s value, and even allow you to drive gains when stocks are struggling. Look to generate above-average investment income when capital growth from stocks is non-existent.

Your portfolio also has more opportunities to make gains with each coin you own. Not every investment will be a winner, but with proper asset allocation and diversification, you’re more likely to make profits in the long run. ETFs can be an easy way for investors to buy into diversified portfolios of stocks and other assets. They aren’t too swayed by the idea that there will be many successful cryptocurrencies and seem to be convinced that the OG cryptocurrency will be king forever. While there are many reasons to think Bitcoin is your safest bet in the crypto market, these investors treat Bitcoin as if it is the only crypto out there.

In an interview with Ukraine-based Fortune contributor Anna Tutova, she discussed her passion for addressing this problem and working for Charles Schwab when the firm was just a startup. Schwab-Pomerantz also offered her views on crypto investing and artificial intelligence—and supporting Ukraine in a time of war. Finally, staying up-to-date with the latest market trends and developments is critical for managing a crypto portfolio effectively. That involves keeping a close eye on news and events that could affect the value of different cryptocurrencies and monitoring the performance of various currencies over time. According to experts, effective risk management also involves keeping up-to-date with the latest market trends and developments.

What Should My Crypto Portfolio Look Like?

While larger coins like Bitcoin and Ethereum may make up a larger share of your portfolio, keeping smaller proportions of other crypto assets can improve your long-term returns, Leinweber says. The investor might elect to buy a wide range of crypto assets from various markets and niches. In this example, we’ll say the investor opts for five different mid-caps at $600 each. Once the make-up of the portfolio has been identified, the investor can then begin allocating funds to each crypto asset. In this regard, it is important to choose an exchange that offers access to a large number of cryptocurrencies alongside competitive fees. Once the size of the investment capital has been assessed, the next step is to create a dollar-cost averaging strategy.

I’ve always recommended a 10% weighting in gold and gold mining stocks, and with the dollar potentially on uneven footing, my conviction has grown even stronger. One of the most obvious ways to diversify your crypto portfolio is to diversify your direct ownership of digital coins. HoneyBricks is on a mission to unlock the potential of real estate investing. We are rebuilding the real estate investment experience, making buying, earning income, and selling income-producing real estate instant, low cost, and enjoyable.

That doesn’t mean your higher-quality holdings are immune to sweeping pullbacks. It’s simply to point out that putting pressure on all stocks separates the winners from the losers. Higher-quality stocks tend to hold up better and should bounce back sooner once the market begins recovering. Another cool part about OKX is that it allows its Customer to pair derivatives trade with fiat currencies. And you won’t have to suffer exchanging from one currency to the other when withdrawing your funds.

DeFi expands the world of crypto beyond buying and selling by offering investors numerous ways to earn yield. Decentralized organizations like “Index Coop” have created tokens that track crypto indices, kind of like how ETFs or mutual funds track various stock market segments. Therefore, diversification in crypto as an investment strategy does make sense.

Having a balanced portfolio with all the four categories of coins could save you from lots of headache and worry. Lastly, investors should always perform thorough due diligence before investing in any coin. It’s pretty similar to a traditional investment portfolio, except you’re sticking to one asset class. You can track your crypto portfolio manually with a spreadsheet or use specialized tools and software to calculate your holdings and profits.

You can trade via its web portal or download its mobile application in Android and iOS versions. Kraken is one of the most trusted crypto trading platforms, and recently, they bought Crypto Facilities to incorporate futures trading into the Kraken family. ➤ The underlying asset can be stocks, bonds, commodities, cryptocurrencies, interest rates, or market indices, as seen in the image from Investopedia below.

This once again highlights the importance of creating a well-balanced and diversified portfolio. With that said, investing in low-cap projects and crypto presales can still represent a viable investment strategy. There is often a misconception that the only way to gain exposure to cryptocurrencies is to buy individual coins.

Master The Crypto is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. MTC has advertising relationships with some of the offers listed on this website. MTC does attempt to take a reasonable and good faith approach to maintaining objectivity towards providing referrals that are in the best interest of readers. This represents the writer’s personal opinions and does not – in any way- constitute a recommendation of an investment or financial advice.


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