Create your first investment portfolio in crypto
Let's go through the following points:
• Distribution of cryptoassets
• Methods of storing cryptocurrency
Exchanges without KYC here 👉 discord.gg/sckfUHxvxD
Allocation of crypto assets in your investment portfolio should depend on your investment goals, risk tolerance and investment strategy.
One of the popular approaches to the distribution of cryptoassets is the so-called "pyramidal" approach. According to this approach, the majority of your portfolio should consist of more stable and less risky assets such as BTC or ETH, which are the most liquid.
The pyramid approach to cryptocurrency allocation is a method used to allocate investments between different types of cryptocurrencies in a portfolio. This approach is based on the idea that different types of cryptocurrencies have different levels of risk and potential returns, and should be allocated in a portfolio accordingly.
At the base of the pyramid are usually more stable and well-known cryptocurrencies, such as BTC and ETH, which are considered more reliable and less risky investments (in the picture, for example, 50% was taken). Further up the pyramid may be less well-known and less stable cryptocurrencies, such as tokens that have not yet received much hype or significant trading volume. At the very top, respectively, are the most risky assets, but which can also bring the greatest profit (5% of them in the example).
In addition, the distribution approach can also consider different sectors of cryptocurrencies, such as financial applications, decentralized exchanges, network infrastructures and others. This helps spread the risks and potential returns between different sectors of the cryptocurrency market.
For example, let's say you have $1,000 in your portfolio, then you can allocate it to:
BTC / ETH = 50%
ETC / SOL / FTM = 30%
ARB / LDO / LSD = 15%
DOGE = 5%
Another approach is the distribution of cryptoassets by risk level. For example, you can divide your portfolio into parts that contain high-risk, medium-risk, and low-risk assets. High-risk assets may include lesser-known cryptocurrencies or ICO tokens, medium-risk assets may include more well-known tokens, and low-risk assets may include BTC or ETH (excluding stablecoins).
Regardless of which approach you choose, you should be prepared for the fact that crypto is always extremely volatile, so your portfolio should be sufficiently diversified to protect you from falling prices for one asset or another.
Recently, the idea of using the so-called "rebalancing" of the portfolio is also becoming more and more popular. This means that you periodically redistribute your assets according to a predetermined distribution. For example, if you decided that 60% of your portfolio should be in BTC, 30% in ETH, and 10% in lesser-known tokens, you can check your portfolio every quarter and reallocate funds if the percentage ratio of assets deviates significantly from the given one.
Consider this idea with an example:
1. In 1 month you bought BTC, ETH and ARB by 60%, 30% and 10% respectively
At the beginning of the 2nd month, the price of BTC and ETH increased, and ARB - decreased
2. Now you have a different share of BTC, ETH and ARB in your portfolio (relative to the dollar)
3. To return to the original strategy (60%, 30% and 10%), you need to sell part of BTC and ETH, or/and buy more ARB
4.It will be appropriate during a bear market to keep part of the funds in stablecoins (USDT, DAI, HAY ..). What percentage of stables to keep is up to you, but some investors during a volatile market go almost entirely to stables (90%+ of the portfolio).
If everything is clear with the portfolio distribution options, let's talk about their storage. There are several ways to store cryptocurrency, each with its own advantages and disadvantages. Here are some of the most popular options:
1. Cold wallets: These are devices or programs that store private keys offline, that is, not connected to the Internet. This makes them more secure from hacker attacks, but less convenient to use. Some of the popular cold wallets are Ledger, Trezor and others.
2. Hot wallets: These are programs or online services that store your private keys online. This is convenient for quick access to funds, but less secure from hacker attacks. Some of the popular hot wallets include Coinbase, Trust Wallet, MetaMask, etc.
3. Exchanges: You can keep your funds on the exchanges where you trade. This is convenient because you can quickly buy and sell cryptocurrency, but it can also be less secure due to the risk of hacking attacks or negligence on the part of the exchange.
The best practice for choosing a cold wallet is to look at https://walletscrutiny.com/hardware/ and look for wallets that have been verified and do not contain extra code and other “implants” that could compromise your wallet.
According to our observations and our own experience, the SharkTrade team uses Trezor and Ledger, which have proven to be among the best in the market in terms of convenience and reliability.
It's also important to follow security best practices, such as using strong passwords, two-factor authentication, and regular software updates. In general, we advise you to save seed phrases for wallet recovery in a notebook (that is, completely offline).