How to correctly create a cryptocurrency portfolio

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Cryptocurrency portfolio

If you are a fan of cryptocurrencies and have been watching the market for a long time, it’s time to create your own cryptocurrency portfolio. This is nothing complicated, especially if you have already dealt with stocks or other instruments – the principle of compiling a portfolio is about the same. Diversification remains a key aspect: it allows you to increase risk-adjusted returns.

Investment criteria

When building a portfolio, you should first develop a reliable method for valuing digital assets. In this sense, cryptocurrencies are no different from other investment instruments. So, in search of promising candidates for getting into the portfolio, ask yourself the following questions:

  • Product / Feature. Does cryptocurrency occupy a specific niche? Is a promising product associated with it, does it have unique properties?
  • Community size / popularity. Can a cryptocurrency boast a large number of users? How interested are enthusiasts and developers in its development?
  • Technology / competitive advantage. Does cryptocurrency solve a certain problem in a unique way? Does it offer an interesting, promising technology?
  • Goals / Management. Do the goals of large owners match those of developers and investors? How is the development team formed and replenished, how are decisions made? Are coins mined gradually or generated immediately?
  • Market opportunities. How serious is the problem being solved? How big is the potential market size?

For each of these criteria we will use an estimate in the range from 1 to 10, for example 10/4/7/3/7.

Cryptocurrency portfolio

If you use cryptocurrencies to expand the diversification of your investment portfolio, include from three to seven digital assets. The meaning here is the same as with diversification between different asset classes: adding cryptocurrencies can reduce risks and increase profitability.

 Largest cryptocurrencies: fixed assets

Any cryptocurrency portfolio should start with bitcoin and ether. Bitcoin is the first and most famous cryptocurrency. It has established itself as a repository of value and boasts the widest network of users / partners. Air (ETH / USD) is based on the idea of ​​“smart contracts”, which with the help of blockchain technology can change the world beyond recognition in the next 10 years. Ether can greatly benefit from their development. Most investors will be wise to invest the bulk of the funds in these cryptocurrencies.

Bitcoin (BTC): $ 9052 (9/10/8/10/9)

Ether (ETH): $ 690 (10/9/10/9/10)

Zombie Currencies

We recommend caution with the so-called zombie currencies. In the past, they could have significant potential, but the market made its choice, and they remained outside it and, accordingly, lost a serious competitive advantage. Bitcoin Cash (EXANTE: Bitcoin.Cash) hopes to become a popular means of payment, offering faster transactions compared to Bitcoin. However, this is a rather vulnerable position, and the interest of miners in cryptocurrency is gradually dying away. Ethereum Classic (ETC / USD), in turn, lost the battle with the ether. And lightcoin (LTC / USD), although they call it “digital silver,” but other cryptocurrencies are ready to supplant it. Thus, until representatives of this category prove their worth or ability to occupy a leading position, it is not worth investing in them.

They may rise in price along with the rest of the market, but the lack of unique characteristics will threaten their prospects.

Bitcoin Cash (BCH): $ 1003 (2/5/8/7/6)

Ethereum Classic (ETC): $ 19.9 (2/4/7/8/6)

Litecoin (LTC): $ 173 (4/6/7/7/7)

Platform Cryptocurrencies

Many cryptocurrencies are tied to their platform, which is using a blockchain to try to solve a specific problem. Ripple is trying to gain a foothold in the international payment market. NEO (NEO / USD) is working on a smart contract extension platform. NEM is involved in the management and creation of smart assets. And the developers of Dash (DASH / USD) are trying in a new way to solve the problem of digital payments.

Ripple (XRP): $0,8 (8/9/9/7/8)

NEM (NEM): $0,4 (8/8/8/7/9)

NEO (NEO): $84 (9/7/8/7/9)

Dash (DASH): $487 (8/9/6/9/8)

Anonymous cryptocurrencies

The goal of other cryptocurrencies, for example, Zcash (ZEC / USD) or Monero (XMR / USD), is to maintain high anonymity of users and keep transactions secret. Each of them is arranged in its own way and has unique characteristics. And since confidentiality is one of the fundamental foundations of the crypto world, your portfolio will surely have a place for representatives of this category:

Zcash (ZEC): $283 (10/8/8/7/8)

Monero (XMR): $253 (9/8/6/8/8)

Protocol-specific cryptocurrencies

Since we are in the early stages of the development of decentralized and blockchain applications, many of the platforms are focused on protocols. In the future, cryptocurrencies will be mainly tied to applications, however, you must first build the appropriate blockchain infrastructure, so at least one of these cryptocurrencies can be included in the portfolio: EOS (EOS / USD), IOTA (IOTA / USD), MaidSafe or BAT (BAT / USD).

EOS (EOS): $5,7 (10/8/9/6/9)

IOTA (MIOTA): $1,3 (10/8/9/8)

MaidSafe (MAID): $0,3 (9/9/8/8/9)

BAT Token (BAT): $0,3 (7/7/8/8/8)

Other promising currencies and tokens

The following cryptocurrencies are highly speculative, but have a certain potential. Many of them focus on applications that are based on the protocols mentioned above. It is better to refrain from buying until they mature, and engage in the formation of a basic cryptocurrency portfolio. Nevertheless, we list several possible options:

Metal (MTL): $4

Steem (STEEM): $2,5

Tierion (TNT): $0,07

Augur (REP): $35

TenX (PAY): $1,4

0x (ZRX): $0,6

Sense (SENSE): $0,03

CRYPTO20 (C20): $1,5

Tip: Avoid ICO

Today in the cryptocurrency market you can find many dubious initial offerings. Many companies conducting ICOs do not have a finished product or a stable revenue. 90% of ICOs have no intrinsic value, and most issued coins today are cheaper than during the initial offering. Sooner or later, regulators around the world will take control of this market segment. And the process will be painful for all of its participants. Invest in ICOs only when there are binding norms for all and projects will be really promising.

What your cryptocurrency portfolio might look like

Assets in a portfolio can be distributed as follows:

Bitcoin (35%): main asset;

Ether (35%): main asset;

Ripple (10%): minor asset, platform for money transfers, diversification;

Zcash (5%): anonymity / confidentiality, specific use of evidence with zero disclosure;

EOS (10%): protocol-specific cryptocurrency. Based on Ether, a large address market, long-term rate;

IOTA (5%): protocol-bound cryptocurrency. Seeks to become the basis of IoT, a large targeted market, long-term rate.

The inclusion of three to nine cryptocurrencies in the portfolio will optimize profitability and reduce risks. In addition, it may include digital assets with great growth potential, capable of overtaking bitcoin and ether. Before selecting candidates for purchase, it is recommended to establish a minimum threshold for market capitalization.

Do not invest in cryptocurrencies with a capitalization of less than $ 100 million. It should be noted that over time, the portfolio may lose relevance due to the dynamic nature of the market and cryptocurrency space. Use the principles described in this article for current and future investments.

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