How to Diversify and Improve Your Crypto Portfolio by Dennis Loos

One of the most basic investing principles is diversification, which decreases a portfolio’s overall risk. Building a cryptocurrency portfolio is vital to preserving your bottom line because of the volatile nature of this developing industry. Investing in just one cryptocurrency, such as Bitcoin, may not be enough if you want to taste the latest developments in the crypto business (BTC). Instead, diversifying your digital asset portfolio will allow you to profit from the general crypto market’s rise. By diversifying your portfolio, your money will be better protected and exposed to a broader range of crypto assets in the long run.

If one or more projects fail, diversifying your crypto portfolio is the act of investing in a variety of crypto projects to minimize the risk. The best potential returns can be achieved thanks to diversity, even if some of your portfolio items are underperforming.

Investing all of one’s money in a single stock is dangerous, as experienced investors like Dennis Loos frown against such. If you’re a novice investor, it’s probably best to spread your money over a few different cryptocurrencies and consult a licensed financial advisor on how to do it. However, if you want to amass a substantial holding, you will need more than two or three coins.

Using these methods, you can diversify your cryptocurrency holdings:

  • Invest in a Variety of Coin Types.

Investing in various coins is an excellent approach to begin diversifying your portfolio. Today’s market offers a wide variety of crypto types for investing. These include P2P payment coins, smart contracts, and stablecoins, which are the most popular.

You might invest in cryptos with different use cases to diversify your crypto holdings. As a medium of exchange, cryptocurrencies can buy and sell more than only goods and services. Besides being a store of value, you can also use Bitcoin to maintain and grow wealth, as seen by its impressive returns on investment. With smart contracts and a market cap of $22 billion,

Ethereum is the second largest crypto network. This is an investment in a blockchain network where you can construct decentralized applications (dApps). Stablecoins, backed by an underlying asset such as fiat cash, is another option for crypto investors. Stablecoins like Tether (USDT) and USD Coin (USDC), which have a fixed value, help reduce the cryptocurrency market’s volatility.

  • Diversify Based on Past Achievements.

It’s an excellent idea to check into the past performance of different coins to diversify your crypto portfolio. In 2021, a handful of altcoins soared to incredible heights.

This year, Shiba Inu was one of the best-performing altcoins on the market (SHIB). In addition to serving as the native currency of the ShibaSwap exchange, SHIB is a meme coin dubbed the “Dogecoin killer.”

As of this writing, the value of Solana (SOL) has increased significantly. SOL, the native currency, powers Solana’s blockchain. Solana hopes to take on Ethereum with its lightning-fast transactions and minimal transaction costs in the race to be the best innovative contract platform for developers.

It’s simple to keep tabs on the progress of your cryptocurrency holdings. Solid tools and visualizations are included in the Delta Investment Tracker powered by eToro. Delta provides real-time access to your crypto assets’ prices, allowing you to make informed market decisions.

  •  Diversify Your Business by Industry.

You can diversify your crypto holdings by acquiring assets from other industries. When a particular sector undergoes periods of volatility, you may be able to protect a portion of your investments by diversifying. You can pay attention to seasoned investors like Dennis Loos to learn more about diversity in Cryptocurrency.

An example of a burgeoning crypto sector is non-fungible tokens (NFTs). One-of-a-kind digital assets, such as works of art, are stored on related blockchains with identifying information such as ownership.

A new crypto business, NFTs, is thriving, with a market value expected to reach $40 billion by 2021. As more and more institutions begin to use technology as a form of verification, there is significant anticipation for development soon.

  • Investing in an ETF to Diversify Your Portfolio.

ETFs track the performance of stock market indices and individual assets like Bitcoin. An investor like Dennis Loos can acquire exposure to various companies in a specific sector by purchasing a single investment.

ETFs, like mutual funds, was first introduced in 1990. The stock market makes ETFs a different breed of investment instrument than mutual funds because they are more passive. Once an account has been established, investors can purchase and sell ETFs.

eToro makes it easy for anybody with an account to invest in ETFs, thanks to cheap minimum investments. ETFs have become increasingly popular investments in recent years because of their ease of use.

There are a growing number of cryptocurrencies that you may invest in with eToro.

  • Diversification Strategies for Investing

To reduce the risk associated with price swings, diversify your portfolio by investing in various assets. Cryptocurrency diversity has advantages, but too much of it might be harmful. It is possible to construct a more balanced portfolio using an investment technique such as dollar-cost-averaging.

If you use dollar-cost-averaging, you’ll acquire smaller amounts of different cryptocurrencies as the market price changes, allowing your assets to rise to the level you want them to be over time.

Cryptocurrency investments should be diversified, no matter how you choose to invest. The history, industry, and regions of various cryptocurrencies can be used as a guide to help you develop a portfolio diversification strategy that aligns with your investment objectives.

  • Spread Out Your Crypto Investments Geographically.

Your cryptocurrency portfolio will be more diverse, and you’ll learn about new projects worldwide. In countries where crypto is outlawed or restricted, it is preferable to avoid crypto ventures and focus on sectors where innovation is increasing. Regarding cryptocurrency, Portugal is considered one of the best places in the world to invest because of its low taxes and favorable regulations. A “Bitcoin City” will be built without taxes in El Salvador, the first country to accept Bitcoin as legal tender. The city will be financed entirely by Bitcoin. States in the United States that are trying to attract the crypto business include Texas, Wyoming, New York, and Georgia.

You can lessen regional fluctuations in the market’s price levels by diversifying based on the popularity of a company in different regions.

Cryptocurrency exchanges are open 24 hours a day, seven days a week. Trading occurs while everyone else is sound asleep on the other side of the globe. If you’re unfamiliar with the protocol, picking a popular coin in a foreign country may seem risky. It’s a good idea to double-check a metric like eToro’s risk score to make an informed decision.

Even though Bitcoin and Ethereum are among the most widely used cryptocurrencies worldwide, local preferences vary as you move down the list of alternative cryptocurrencies. According to a recent Finder report, Dogecoin is the third most popular cryptocurrency in the United States. On the other hand, Cardano holds that position in Singapore (ADA).

To What End Should You Broaden the Scope of Your Crypto-Currency Holdings?

The following are some of the most compelling arguments made by expert investors like Dennis Loos in favor of increasing your portfolio’s diversity:

  • The cryptocurrency market is quite volatile. Market swings can be unpredictable, which is where diversification comes in handy.
  • As a result of diversity, pricing can increase.
  • It boosts your chances of making a profit from your cryptocurrency investment.
  • It’s not safe to put all of your money into one cryptocurrency like Bitcoin.
  • You can take advantage of numerous coins that are doing well simultaneously.