The cryptocurrency market has made many investors very wealthy. It is important to evaluate this market, so one can put together a portfolio that will show a return on your investments. To mitigate the risk of investing in cryptocurrencies we recommend a portfolio approach. We created the following cryptocurrency portfolio strategy to guide you through the process of selecting and diversifying your crypto holdings for long term success. It includes an overview of the basic concepts and mathematical calculations behind building a cryptocurrency portfolio. This is only meant to serve as a guide to help you select and diversify your portfolio with the intention of earning returns over what could potentially be a very long period of time.
1. Define your investment goals :
The first step to building a crypto portfolio is to define your investment goals. It is important to understand in advance how you want to use your portfolio and what kind of risk you are willing and able to take. This will help you decide which coins to invest in and what percentage of your wealth you want to put into cryptocurrency. It will allow you to determine the percentage of your crypto portfolio manager to allocate to each coin. This will help keep you on track to reach your investment goals. Think about how much you are willing to lose and use this as a guide for buying different cryptocurrencies.
2. Calculate and research cryptocurrency market capitalization :
Market capitalization is one way to measure the value of a cryptocurrency and it is calculated by multiplying the circulating supply by the current market price. Keep in mind that the value of a cryptocurrency is not necessarily the same as its price. The market cap is important because it shows you how big of an investment opportunity the coin or token presents. It will help you decide which coins to invest in and what percentage of your wealth you want to put into cryptocurrency.
3. Calculate and research the coin supply :
The total supply of a coin is the most important number since it helps you determine how much of a particular currency will be available for investment, circulation and trade. It tells you exactly how large the market is for that particular cryptocurrency. The calculation for total supply is simple and is the total number of coins multiplied by their individual unit value. Once you have this information, you will be able to compare different crypto coins and determine which one will likely be more successful as an investment over a long period of time. To determine the unit value for each coin, you can simply divide the coin supply by its current market price.
4. Define your risk tolerance :
There are two major types of risk that one has to consider before investing: systematic and unsystematic risk. Systematic risk is a financial term that refers to any form of risk that can affect an entire market. As an example, if you worry about the US economy, then this could affect your entire portfolio. A good way to deal with systematic risk is to diversify your portfolio across multiple market sectors and asset classes. Unsystematic risk can affect a single asset and a small number of assets within a broad investment category.
Binocs is a crypto tax software and Portfolio Management platform which is designed to help you invest in cryptocurrencies and have a nice return. It allows users to take a deeper understanding of the cryptocurrency market and manage their investment portfolio.