If you’ve been looking into
cryptocurrencies, and if you’ve invested in some of these coins already, you’ll
likely be aware of how volatile the marketplace is. When you’re investing,
whether it’s in stocks, currencies, bonds, or crypto, you’ll want to make sure
you’re diversifying your investments enough so that if one particular market
plummets in value, you’ve got other investments to fall back on. Managing your
cryptocurrency portfolio effectively isn’t the easiest task, so we’ve put
together some reasons as to why this is important and how you can best achieve
a balanced portfolio.
Why Should You Diversify?
You may have chosen a specific cryptocurrency to start investing in and feel a
certain loyalty to that coin, but holding one particular coin is not wise, even
if it is Bitcoin, which is continuing
to stay strong in the marketplace despite some knocks. The cryptocurrency
market is actually incredibly volatile, meaning high and low spikes in value
are common, but while this can be very profitable, it can also lead to people
losing a fair bit of money too. Not only that, but the volatility makes the
marketplace hard to predict, which deters safer, low-risk investors from
getting involved due to the fear of market crashes and plummeting value.
How To Balance Your Portfolio
To reduce your risk of disappointment in the event
that one of the crypto coins you’ve invested in takes a sharp downturn in
value, make sure you have other cryptocurrencies in your portfolio. Of course,
a wise decision would be to diversify your entire investment portfolio,
especially if you’re focusing on crypto, as the values of these coins often
influence each other, especially Bitcoin. This major cryptocurrency is often a
big influencer due to being the first, and also have the most secure network.
You may find that some will trade their crypto coins such as Ethereum and
Dogecoin for Bitcoin to benefit from some extra stability during uncertain
times in the market. If you’d like to know how to exchange your ETH to
BTC, check out Paxful’s helpful blog post. Of course, we would still highly
recommend having a mix of low and high-risk investments, and that should really
include some outside of the world of cryptocurrencies like stocks and even
bonds, as this ensures that your entire investment portfolio will become more
balanced.
Diversifying Your Investments To
Identify The Big Gainers
Having a stake in many different cryptocurrencies
may spread out your wealth and investing power, but it also allows you to get a
better handle on any potential coins that might begin to outperform others. There are
thousands of different cryptocurrencies in the marketplace now, most of
which are trying to follow in the footsteps of Bitcoin, providing some form of
benefit to the world, and this assigns an inherent value to those coins. As one
of your investments begins to gain value, you could then sell off a portion of those
coins, and reinvest the gains into more cryptocurrencies, growing your
portfolio further and potentially investing in the next big cryptocurrency. Just
remember that while the rewards for buying into this marketplace could be high,
it’s also very risky, so invest wisely.