Rapid growth and big-name endorsements from governments, tech giants, and billionaires alike have given cryptocurrency the status to move on from being ‘the next big thing’ and establish itself as a viable, genuine player in the global economy.
Why you need to diversify your portfolio
Making profits and protecting your investments in the extremely volatile cryptocurrency climate where an Elon Musk tweet can raise or dip the curve drastically in a matter of hours is not for the faint-hearted. One way to maximize your investments is by diversifying your portfolio.
Diversifying your crypto portfolio means spreading your funds into different assets or asset classes and it provides the advantages of increasing your chances of making profits as well as protecting your portfolio from taking a massive hit if you were to invest in only one cryptocurrency that may tumble.
There are two main ways of diversifying your crypto portfolio; investing in different currencies and spreading your assets in various industries. It’s important to remember that cryptocurrency is a high-risk business and all investments should be made with caution and planning.
Investing in Different Currencies
This is the more obvious way to diversify your portfolio. Although only about 20 cryptocurrencies make up the majority of the market and are considered the most profitable, there are more than 4,500 digital currencies under the digital coin umbrella.
Bitcoin is the undisputed king of the hill in the crypto world, but there are other currencies such as Ethereum, Litecoin, and Stellar that are making inroads and are proving to be quite profitable.
Diversifying into more than one crypto coin means that when one currency faces opposition from governments, Elon Musk’s tweets or regulation changes, your portfolio isn’t going to collapse by default. The phrase ‘don’t put all your eggs in one basket is basically the rule of thumb here. Moreover, you can try out crypto bots that scan the market and trade for you such as napbots.
It’s important to remember that cryptocurrencies aren’t exactly alike; in addition to having different prices, they also function differently. For example, where Bitcoin is transactional, Ethereum is a yield earner. Making investments in 2 or 3 different cryptocurrencies means that you’re in no danger of folding when one currency begins to dip and increases your channels for profit across the board.
Investing in Different Industries
You can also diversify your crypto portfolio by investing in various industries. It is now possible to use Bitcoin to invest in corporate stocks as companies that make use of it. Since you can use your crypto as a tool to make investments, it would be wise to put your digital resources into different industries. Again, not putting all your eggs in one basket applies here. Investing in both stable and fast-growing companies ensures a spreading of liabilities as well as multiple avenues for profit.
Companies in the industries of sales, manufacturing, casinos, and gambling are most likely to be profitable. There are also globally competitive industries like medicine and banking to consider for making investments.
In the same manner as day traders, stockbrokers, and bond investors, trading in cryptocurrency is basically a form of risk management and asset protection. Managing investments, trading based on prices, and a dash of luck are all important. Wisely spreading your investments across the board is a good way of staying ahead of the curve and making gains.