What is a Cryptocurrency Portfolio?
Just like any other investment portfolio, cryptocurrencies portfolio represents all different kinds of virtual currencies you have invested in.
For example, if you have invested in not just Bitcoin, but also other cryptocurrencies like Ethereum, Dogecoin or Litecoin, the accumulation of all these various currencies would form your portfolio. Its worth, however, hinges directly on the current market price of your cryptocurrencies.
When you start off in the virtual money world, you might put money in just one digital currency, like Bitcoin, which would make up your entire investment. However, once you begin buying other cryptocurrencies, your investment begins to grow.
Once you have got a foot in the ‘virtual money’ door, you might find yourself questioning ‘Now that I have a Cryptocurrency Portfolio, how do I manage it?’
Below are some of the key points you should consider when answering this question.
Diversify Your Portfolio
The virtual money marketplace is like any other, borne with its own risks and threats. If the investment is diversified, the overall risk it is correlated with is mitigated. Some new entrants into the virtual money investor marketplace believe investing in a single digital coin like Bitcoin would yield them millions of dollars and set them up to become millionaires in the future.
However, the virtual money marketplace is extremely volatile. While Bitcoin’s value soared like never before in early 2021, it came crashing down after just a few months owing to market sentiments among other factors.
This volatility of the virtual money ecosystem increases the risk element, especially if the stockholders have their money stocked up in a single coin. One bad day and it could mean the end of their ‘millionaire’ dream. To minimize this risk, diversification of your holdings is crucial. Investing in several various digital coins can help save the investors in case one of the coins finds itself in a rainy day.Higher the Diversification, Lower the Risk
A diversified investment is thus more stable because not all cryptocurrencies will underperform at the same time. Diversification reduces the risk and increases the return. By putting their money in a single asset, investors are more vulnerable to unsystematic risk. So, diversification reduces the impact of marketplace volatility and the time spent monitoring the holdings.
Use the Dollar Cost Averaging Strategy
This strategy splits the investment into several periodic investments in order to reduce the degree of impact of market volatility. Moreover, Dollar cost averaging (DCA) is a long-term investment plan that in turn assists the cryptocurrencies portfolio to lighten the risk and grow more steadily and positively over time.
Track Your Crypto Portfolio
It is vital to keep track of your cryptocurrencies if you wish to effectively manage it. There are multiple cryptocurrency market apps and tracking apps that allow investors to track current prices and values of the various virtual assets they have invested in. Managing different cryptocurrencies in their individual crypto wallets can also be a hassle. You can opt for an efficient digital wallet that not only makes your use of virtual currency easier, but also helps keep track of your holding’s worth.
Manage your Sentiments
Market players’ sentiments are a major factor in the fluctuations in the digital currency marketplace. Extreme fear and anxiety among stockholders can make the digital currency market prone to uncertainties. It is vital for them to be pragmatic when investing in digital currency. Try to be more realistic when investing in digital assets. Fear of missing out and peer pressure is another reason why newbies make impulsive funding decisions and purchase digital currency at a high price.
The best practice when it comes to managing a virtual currency investment is to be aware of the digital money economy through research and build a plan for the future so that impulsive decisions can be avoided.
As mentioned earlier, a diversified investment lessens the overall risk and volatility of your holdings. The DCA method can be opted for in order to ensure long-term portfolio growth. Along with this, keeping yourself informed of the assets’ worth and keeping your emotions in check can further help with effective management. To Know more about us Click Here