Investment Portfolio in Cryptocurrency: A Comprehensive Overview
An investment portfolio in cryptocurrency is a collection of various cryptocurrency assets carefully selected from different sectors and directions in proportional accordance with an individual strategy. The strategy takes into account risks, profitability, and the ratio of free capital to the total amount allocated for investments.
Advantages of Portfolio Investments:
- Diversification Opportunity: You can distribute your investments among multiple cryptocurrencies, thereby reducing risks associated with price fluctuations of individual assets. If one cryptocurrency’s value drops, another may rise, helping to offset losses.
Psychological Stability: Portfolio investing can help you avoid emotional decision-making when buying and selling assets. Considering investments in the context of a portfolio rather than individually allows you to see the big picture and assess risks and potential returns more rationally.
The basic distribution of investment funds is represented by three crucial parameters:
Long-Term Portfolio Amount: This is the total amount of funds allocated for long-term investment purposes. This portion of the portfolio is fundamental for investors whose strategy entails a risk/reward level not exceeding the average.
Objective: Implementation of long-term investment transactions with the aim of generating profits.
Risk Assessment Parameters:
- Percentage of total capital: The higher the percentage of the total capital that the long-term portfolio represents, the less risky it is. When evaluating, always consider the market phase and adjust for personal strategy.
- Number and capitalization of assets: A lower number of assets with high capitalization indicates minimal risks.
Free Capital: Free capital refers to the amount of unused funds recommended to be maintained in any market phase. The percentage of free capital from the total amount allocated for investments reflects the purchasing power of any investor/speculator. This parameter assesses the permissible degree of risk and portfolio efficiency.
Role:
- Enables the acquisition of long-term assets at an additional percentage during market declines, following Risk and Money Management principles.
- Facilitates participation in individual investment/speculative setups.
- Allows allocation of additional funds to projects that are newly entering the market and not considered in the formation of the long-term portfolio.
Risk Assessment Parameters:
- Percentage of total capital: The higher the percentage of free capital from the total amount allocated for investment, the less risky the portfolio will be. !!!IMPORTANT!!! This parameter is considered in conjunction with the market phase.
Trading Capital: The amount allocated to various directions, serving as a direct tool for profit generation in different time ranges.
Role: Trading capital serves as an active tool for capital growth, with the aim of subsequent distribution into the aforementioned portfolio sectors or increasing positions in trades. When proportioned and used wisely, trading capital ensures an inflow of stablecoins over the long term.
Risk and Efficiency Assessment Parameters:
- If trading capital is engaged in positional spot trades on highly liquid assets, this portfolio segment is considered less risky. If trading capital is predominantly involved in trading with leverage or spot trading on illiquid assets, this portfolio segment is considered risky. Simple Principle: More and faster profit equals higher risks.
- Percentage of total capital: It is recommended to maintain the initially set percentage of total capital for effective portfolio operation. Profit from this sector is recommended to be “transferred” to Free Capital when actively used. If the percentage of trading capital is less than 10% of the amount allocated for investment, the portfolio loses efficiency due to the lack of a stablecoin inflow. If the percentage of trading capital is more than 50% of the amount allocated for investment, the portfolio becomes high-risk.
The distribution of the long-term portfolio is based on diversification through division into three key directions:
Fundamental Assets: These are assets that have proven themselves over the years in the cryptocurrency market, exhibiting maximum reliability, acceptance, and capitalization. These assets play a leading role in portfolios of any risk level, ensuring the preservation of capital over the long term.
Ecosystem Assets: These are assets with a developed ecosystem, usually blockchains on which other projects are built or those with real-life applications. These assets provide a predictable average return with a corresponding level of risk.
Promising Assets: These are assets with a lower level of capitalization and acceptance. They may include “trending” assets, promising undervalued protocols with a high level of risk and profitability.
Conservative Portfolio : primarily composed of fundamental assets with high capitalization. Such an investment portfolio is characterized by minimal risk (to the extent possible in the cryptocurrency industry), moderate profitability, and maximum purchasing power. This portfolio is suitable for investors with substantial capital who prefer not to expose their investments to high price volatility and engage in position trading with highly liquid assets.
Key indicators of a conservative portfolio:
The allocated amount for cryptocurrency is distributed as follows:
- Long-term portfolio: 60%
- Free capital: 30%
- Trading capital: 10%
The distribution of the long-term portfolio across sectors is as follows:
- Fundamental Part (80%):
- Consists of Bitcoin and Ethereum as the most reliable cryptocurrency investments at the moment.
- The third asset in this sector should be chosen from assets ranked no lower than the top 15 on CoinMarketCap.
- Number of assets: 3 coins.
- Ecosystem Part (15%):
- Comprises strong projects with a developed ecosystem within the top 25 on CoinMarketCap.
- Number of assets: 6 coins.
- Promising Part (5%):
- Comprises essential protocols and blockchains undervalued and within the top 100 on CoinMarketCap.
- Number of assets: 9 coins.
This distribution allows for a safe and calm approach to investments with minimal risk and decent potential profit.
Free capital constitutes 30% of the total investment amount, providing the portfolio with maximum purchasing power. This allows allocating additional percentages for investing in fundamental projects without the risk of running out of free funds.
Trading capital constitutes 10% of the total investment amount and is distributed as follows:
- Spot Trade (27%)
- Spot Invest (22%)
- Spot Pre-Pump (17%)
- IDO (17%)
- Gems (17%) of the trading capital.
It is important to note that this distribution of trading capital ensures the most conservative and safe speculative trading with highly liquid assets.
Conclusion and Recommendations:
A conservative portfolio is suitable for investors who do not wish to spend much time trading, preferring calm spot investments and speculation without leverage on top high-liquidity assets in the cryptocurrency market.
It is recommended to select assets with a capitalization ranking of no less than 100 on CoinMarketCap and always conduct thorough research on projects.
A conservative portfolio ensures a smooth growth of the deposit over time.