{"id":8380,"date":"2018-04-27T13:43:29","date_gmt":"2018-04-27T20:43:29","guid":{"rendered":"https:\/\/coincentral.com\/?p=8380"},"modified":"2021-09-29T10:30:53","modified_gmt":"2021-09-29T14:30:53","slug":"how-to-build-a-proper-cryptocurrency-trading-portfolio","status":"publish","type":"post","link":"https:\/\/coincentral.com\/how-to-build-a-proper-cryptocurrency-trading-portfolio\/","title":{"rendered":"How to Build a Proper Cryptocurrency Trading Portfolio"},"content":{"rendered":"

Coins, Coins Everywhere<\/span><\/h2>\n

When starting cryptocurrency trading, the vast number of coins to choose from can be overwhelming. From the thousands out there, how can you possibly decide which few to keep in your portfolio?<\/span><\/p>\n

Although there are an endless amount of strategies when choosing coins, there are a few different tactics you should follow to minimize your risk. In this guide, we\u2019ll teach you the tips and tricks on building your portfolio, so you have a more successful cryptocurrency trading experience.<\/span><\/p>\n

Diversify Across Market Caps<\/span><\/h2>\n

\"diversity\"<\/p>\n

A great way to minimize your downside risk when cryptocurrency trading is to diversify your holdings across different market caps. <\/span><\/p>\n

In case you don\u2019t know, the market cap of a cryptocurrency is its price multiplied by its circulating supply. Usually, the higher the market cap of a coin, the less volatile it is. A properly diversified portfolio contains a mix of large (>$5 billion), medium ($250 million to $5 billion), and low (<$250 million) market cap coins.<\/span><\/p>\n

Large market cap coins like Bitcoin<\/a> and Ethereum<\/a> may not experience the same 40-50% runs that smaller altcoins do, but their price typically holds better in bear markets.<\/span><\/p>\n

How you diversify among these classes depends on your risk tolerance. If you think that investing in cryptocurrency is already a gamble, a portfolio that consists 95% of large-cap coins may be appropriate for you.<\/span><\/p>\n

Maybe you have disposable income, though, that you wouldn\u2019t be too<\/strong> upset losing. In that case, it may be worth putting over half of your portfolio in small-cap cryptocurrencies. Coins in this class have a high probability of being worth nothing down the road, but the ones that end up growing 100-200x could make the risk worth it.<\/span><\/p>\n

In the end, you should do a serious evaluation of your risk tolerance as well as the amount of money you\u2019re willing to lose and choose your market cap split based on that.<\/span><\/p>\n

Consider the Industry<\/span><\/h2>\n

Another thing to consider when building your cryptocurrency portfolio is the industry that each coin is targeting. There are a couple of different ways you can approach this.<\/span><\/p>\n

Diversify Across Industries<\/span><\/h3>\n

Once again, diversity is key. Because blockchain is still young, it\u2019s difficult to predict which sectors will be most accepting of the new technology. To hedge against this risk, it\u2019s recommended that you invest in coins across different industries.<\/span><\/p>\n

You can group the most popular cryptocurrencies into a few different categories:<\/span><\/p>\n