Crypto Portfolios: Meaning and Creation
Advanced crypto trading usually includes working with several cryptocurrencies at the same time. It’s more efficient than sticking to just one coin, but it also requires more skill and expertise. A collection of coins you’re currently holding is called a portfolio, and creating efficient portfolios is part of a trader’s routine.
Any bitcoin exchange in existence will let you buy several coins and keep several crypto positions open. It’s safer this way, and you can potentially gain more money by investing in multiple coins simultaneously. So, let’s see what makes portfolios so efficient and how to apply them to cryptocurrencies.
In regular trading, a portfolio is simply a collection of assets. It can include any assets in any composition, and the resulting combination is essentially the backbone of a portfolio. It’s not different in the crypto world, except you have coins instead of shares and futures. Working with portfolios is beneficial because of several key advantages.
- RISK MANAGEMENT
Portfolios are one of the main tools to safeguard yourself from excessive losses. The logic goes as follows: if the value of your crypto is distributed among several coins instead of just one, the loss of one coin won’t mean the loss of all. Basically, don’t put all your eggs in the same basket.
It works with crypto just the same, and risk management is very important nowadays, seeing how much cryptocurrencies suffered at the end of 2021. It is more difficult to use portfolios for risk management under these circumstances because the crypto market in its entirety is hit, but it’s better than nothing.
- MORE PROFIT OPPORTUNITIES
If you have more coins on your hands, you can exploit more opportunities for profit. For instance, if one coin refuses to grow that day, another may very well just in price. And this advantage doesn’t just work for coins in your portfolio, but also for coins on your watchlist (the currencies you’re notified about).
Portfolio coins simply have the honor of already being bought by you. All you have to do is see to it that they are sold and bought at an opportune moment. If one coin is more successful than others, you can partially liquidate the latter and added their value to the former. Just don’t forget that you need other coins for risk management.
Using Portfolios with Crypto
Crypto exchanges usually have a decent infrastructure for tracking and building portfolios. It’s just a matter of buying the coins that you find lucrative (or someone else does) and tracking their progress in a single place where you can make quick decisions.
Crypto portfolios are usually built with Ethereum, Bitcoin, and other coins that may be more stable in price than them. There are even cryptocurrencies literally known as ‘stablecoins’. A value of a stablecoin is often steady, even stagnant. It makes for a perfect risk management solution.
Some popular stablecoins include, for instance, USDT (Tether) and USDC – both collateralized by dollars. But you can include any other coin in your collection. In fact, many exchanges and private specialists provide fresh portfolio compositions on a regular basis. Your job is just to keep track of them.