Although there are many reasons to get involved with cryptocurrency, most, if not all, initially get involved to build a financial portfolio with the hopes of future wealth.
Understanding a few key strategies can help you to build a solid cryptocurrency portfolio for a bull run.
Now, disclaimer, this How To Crypto blog is not financial advice. It is just fundamental strategies that can help you make better decisions and help you prepare a portfolio that you could reap great benefits from in a bullish market. Also, keep in mind, you will not always pick a winner, so it is more important to build a balanced portfolio with a mix of risks that you are comfortable with.
That level of risk is different for everyone so the only person that can make that decision is you.
The first thing you need to do is to ensure that you have a positive attitude. As James Allen wrote in the book As a Man Thinketh, “A person is limited only by the thoughts he chooses.” Is it normal to have negative thoughts and fear?
Absolutely, but we must consciously focus on always returning our mind to positive thoughts. Positive thoughts will form our belief and our belief dictates every action we take or fail to take in life, and in trading. A positive attitude does not mean to deny the truth by saying everything is great. A positive attitude is where we remain positive and hopeful, even when something is wrong.
Losses in trading and investing are inevitable, but, looking at each trade or even each mistake as a learning opportunity can help you to stay positive even in the face of adversity. The opposite of a positive attitude is a negative attitude, which can lead you to place anger and even blame on things outside of your control.
Not taking responsibility in your trading journey and painting yourself as a victim will lead to no personal growth and little-to-no success in your trading journey. Also, ensure you are aware of the emotions of fear and FOMO, or fear of missing out, as these can drive you to deviate from your strategy by causing you to either sell after a dip or buy after a massive pump.
Next what you want to do is evaluate and decide on your mix of top market cap cryptocurrencies that have less long-term risk, like Bitcoin, Ethereum, etc. These should be ones that have enough of a historical trend to evaluate cycles of up and down movement. Past performance does not always indicate future performance, but if that project is still pushing forward and developing, it could have a better chance of generating returns for you.
The percent you put into top market cap coins will vary depending on the amount of risk you want to take, but usually, for new people, I recommend at least 60-70% of your total portfolio in Bitcoin, Ethereum, and a select few other top market cap cryptocurrencies. I have learned from experience in the past going too heavy on risky new coins and tokens and realizing I would have had better returns if I had stuck with just Bitcoin and Ethereum for most of those investments.
You will still need to utilize Coinmarketcap.com or Coingecko.com to check out the current stage of the project, upcoming updates, and releases on their roadmap, and market sentiment on if what they are doing is relevant and cutting edge, or is it just hype and speculation with little to no innovation.
Identifying where to put the rest of your portfolio will vary for each person so here are a few tips that could help you decide. Look at what topics are heating up in the market, in the news, and upcoming demand that could solve issues. Just an example, but the current supply chain issues with shipping right now could be optimized with projects focusing on supply chain tracking and metrics so getting into a project related to that could potentially bring significant gains.
If you look back to the boom of Defi in 2020 and the boom of NFTs in 2021, many of us got into projects related to those early and held through the early volatility and now have reaped the rewards of investing in some of those projects. What are the next up and coming demands or development in cryptocurrency and the corresponding blockchain tech? Another thing to look for is to zoom out on the charts and see which projects have either not taken off yet or have not pumped since the last major bull run.
You will need to dig in to make sure the project is still viable and has a decent community and development happening on it, but this can help you buy at or near the bottom of a market cycle and reap the rewards as a project moves back up, or a new release can cause a pump in the price based on their roadmap. An example of this recently for me was with Tezos. Tezos had some significant drops in price below $2 and even below $1 over the past year and a half, but a lot of solid development has been happening with Tezos and a good bit of implementation of their network.
As of the time of this writing, Tezos is now sitting around the $8 price point. This is also a good time to remind everyone that price alone is not a good indicator of what to buy. Many will buy just because X cryptocurrency is under a dollar or even under a penny in price. The total supply of each cryptocurrency is important to take into consideration. Depending on available supply, a cryptocurrency with a value of $100+ each could be a better value than one at a fraction of a penny.
You cannot cut corners and avoid doing your own research. That is a key thing you must do to ensure you are making better decisions. Investing without researching what you are investing in is no different than gambling at a casino. Without going too deep into it here, if you want to learn the strategies to better help you research, visit our past blog on the topic.
While there is nothing cutting edge about what we discussed in this blog, sometimes it is important to slow down and research what you may be currently holding and what you plan to invest in so that you can ensure your decisions are sound and make sense. Too many times, we see people throw research and caution out the window and jump in based solely on hype. It is also important to remember that you don’t truly make a profit until you sell. Most people fear selling and then that cryptocurrency pumping after you sell.
One thing I usually do and recommend is to sell and take out your initial investment as the market pumps up. This allows you to truly be in a risk-free investment as taking out your initial capital also removes many people’s emotions. How quickly you remove initial investment depends on how fast the market moves and also, what you decided on when you initially invested what your take profit point would be.
This allows you to stick to a strategy and not base your decision on FOMO. Also, finally remember, success dances with those already on the dance floor, so as you continue to dive in deeper to increase your knowledge in cryptocurrency and research projects, you will find great investments that you would not find otherwise.
Content written by Blockchain Wayne and NewsCrypto Team