The cryptocurrency market is popular for its high volatility or rapid price changes. While this volatility presents opportunities for making money, it also exposes crypto investors to risks. For this reason, it’s essential for you to have a solid crypto portfolio strategy.
A well-structured crypto portfolio can help you to balance risk, increase gains, and prepare you for the unpredictable nature of the market. Your long-term success in crypto investing is dependent on your ability to have a balanced crypto portfolio.
In this article, you will be exposed to the best crypto portfolio strategies that will set you up for consistent profitability.
What is a Crypto Portfolio?
A crypto portfolio is the collection of digital assets or cryptocurrencies an investor holds. It can include large-cap, mid-cap and small-cap cryptocurrencies as well as stablecoins, and even memecoins.
Large-cap cryptocurrencies are those assets whose market capitalizations are over $10 billion. While mid-cap cryptocurrencies are those assets whose market caps are between $1 – $10 billion, small cap cryptocurrencies are those with market caps below $1 billion.
The primary goal of having a crypto portfolio strategy is to diversify holdings so that the performance of one asset does not determine the fate of your entire investment. In essence, a balanced crypto portfolio helps you to diversify your crypto investments.
Read also: How to Become a Profitable Crypto Trader
Crypto Portfolio Strategies for Beginners
Below are some of the best crypto portfolio strategies to adopt:
- Start with well-established assets
You should anchor your portfolio around well-established and less risky assets such as Bitcoin (BTC), Ethereum (ETH), etc. Together, BTC and ETH dominate over 60% of the entire crypto market.
- Use stablecoins to secure profits
Holding a percentage of your portfolio in stablecoins such as TetherUSD (USDT) or USD Coin (USDC) helps protect you against volatility and ensures you have liquidity for buying dips.
- Diversify with promising altcoins
Instead of chasing every newly-launched cryptocurrency, select some of the top altcoins with strong ecosystems, utility and adoption to invest in.
- Adopt the dollar-cost averaging (DCA) concept
Rather than investing a lump sum, you could spread your purchases of crypto assets over time to reduce the impact of price swings.
- Avoid overexposure
Some investors often fall into the trap of buying too many tokens. However, it is better to concentrate your capital into a few solid crypto assets until you gain sufficient profit to invest in multiple assets.
Expert Crypto Portfolio Strategies
- Balance between high-risk and low-risk assets
One of the secrets of expert investors is knowing how to balance risk. While beginners might get carried away chasing “the next 100x coin,” experts understand the importance of anchoring their portfolio with safer bets.
This is why many experts dedicate 40–50% of their holdings to BTC and ETH. These two giants have proven resilience through multiple bear and bull markets. From there, about 30–40% goes into mid-cap altcoins i.e projects with strong fundamentals but still room for growth.
Finally, the 10–20% allocation to high-risk experimental tokens allows experts to take advantage of potential moonshots without jeopardizing their entire portfolio. This balance ensures that even if the risky bets don’t pan out, the core assets remain strong.
- Leverage DeFi and Yield Farming
Beyond buying and holding crypto assets, you can make your idle assets work for you. Decentralized finance (DeFi) platforms provide opportunities to earn passive income through crypto staking or yield farming.
Instead of letting your coins sit idle in a crypto wallet, you can put them into lending pools or liquidity farms where they earn returns. Of course, yield farming comes with risks like impermanent loss and smart contract vulnerabilities.
For this reason, it’s more suitable for those who understand how to evaluate DeFi platforms and manage those risks. If you do this well, it can turn a static portfolio into an income-generating machine.
- Non-fungible tokens (NFTs) and metaverse exposure
The rise of NFTs, metaverse projects, and gaming tokens has introduced a whole new frontier of opportunities. While volatile, these sectors have proven they can produce massive returns over a given period of time.
Nonetheless, you don’t go all-in here, but you can dedicate 5–10% of your portfolio to this category.
- Rebalancing the Portfolio
Beginners often fall in love with their assets, wanting to hold them indefinitely. Smart investors, however, know that portfolio rebalancing is important. The crypto market moves in cycles, and coins that pump hard often retrace later.
So, instead of watching your profits disappear, you should take profits from overperforming assets and shift them into safer ones like BTC or stablecoins. This approach ensures that gains are locked in and reduces the risk of being overexposed to hype-driven tokens.
Read also: The Ultimate Guide to Crypto Investing
Tips for Managing a Crypto Portfolio
Here, we share some tips to help you manage your crypto portfolio:
- Manage risks with stop-loss orders
You have to always remember that not every trade will go your way. Setting stop-loss orders on your trades can protect you from big losses. For example, if you buy a token at $100, you could set a stop-loss at $85 to automatically sell if the price drops too far.
- Avoid emotional decisions
Fear of missing out (FOMO) and panic selling are common mistakes of some crypto players. You should endeavour to always stick to your strategy. Also, remember that the crypto market moves in cycles, and even major coins have gone through 50–80% drops before bouncing back.
- Make security a priority
All portfolio management efforts mean little if your funds aren’t secure. On this note, always choose non-custodial wallets over custodial counterparts, enable two-factor authentication (2FA) and avoid keeping large amounts on centralized crypto exchanges.
- Think long-term
Finally, remember that building wealth in crypto takes time. Short-term trades can be profitable, but long-term strategies often deliver better results. However, don’t risk money you can’t afford to lose.
Read also: 10 Best Crypto Trading Strategies to Make Money
Conclusion
At the end of the day, there’s no “perfect” crypto portfolio strategy that works for everyone. What really matters is knowing your own risk tolerance, investing what you can afford to lose and being consistent with your investment strategy. By doing so, you’ll always remain profitable.
