What Should You Pay Attention to When Creating a Cryptocurrency Portfolio?
Cryptocurrencies are financial assets created on blockchain technology and are usually decentralized. Although they emerged to solve the cumbersome structure of the traditional financial system, they possess many features in various fields. The prices of cryptocurrencies can move within a broader range in shorter periods compared to other financial products. This indicates that cryptocurrencies are volatile. Volatility is the tendency for the prices of financial assets to change rapidly and significantly over specific periods. Despite being used in various fields around the world, cryptocurrencies have not yet been fully adopted. This contributes to their higher volatility compared to other assets.
Things to Consider When Creating a Portfolio
Diversification
It is crucial to diversify assets when creating a portfolio. Diversification is paramount when forming a cryptocurrency portfolio. The concept of portfolio diversification has evolved since the second half of the 1900s. Initially, it included only stocks from different sectors, but with the emergence of modern finance theory, correlations and relationships between stocks began to be considered. By including assets with negative correlations in the portfolio, protection against project or sector-specific declines can be achieved.
When creating a cryptocurrency portfolio, it is essential to pay attention to diversification elements. For instance, a portfolio consisting only of NFT projects could lose significant value if the popularity of NFTs wanes. Therefore, it is crucial to choose assets with future potential and low positive correlation. A portfolio that includes DeFi, NFT, Artificial Intelligence, Platform Tokens, Fan Tokens, Blockchain Projects, and DEX tokens, rather than just DeFi projects, is more beneficial in terms of diversification.
Project Research and Fundamental Analysis
Project research and fundamental analysis are other factors that should not be overlooked when forming a cryptocurrency portfolio. Each project’s technology, TPS (transactions per second), and capacity can vary. Factors such as the field in which it operates, sector potential, and the problems it solves should be examined in detail. When conducting fundamental analysis, it is also essential to thoroughly examine the project’s tokenomics. Knowing when the token supply will be released to the market helps you understand price movements.
Risk Attitude
Investors’ attitudes toward risk are also a determining factor in portfolio formation. Everyone’s investment approach is different; some investors prefer to take high risks, while others lean towards lower-risk assets. It is essential to remember that high risk does not always yield high returns.
Portfolio Allocation
Portfolio allocation is another important aspect. Deciding how much of each cryptocurrency to include in the portfolio is crucial. Typically, it is preferred to allocate more to projects with high market capitalization. Bitcoin is a common asset in many cryptocurrency portfolios.
Secure Storage and Custody
Secure storage is a more important issue than diversification and structuring of the portfolio. Storing your assets securely is one of the fundamental ways to protect your investments. At Arbitex, we ensure that all your assets are securely stored. However, it is also essential to keep your assets in cold wallets or other hardware wallets.
Market Monitoring and News
The cryptocurrency market operates 24/7. Due to its continuous trading and the constant release of news, it is crucial to regularly monitor market movements. To keep up with this fast news flow, you can follow the news feed section on arbitex.com or use the research section on the Arbitex mobile app to get real-time daily news updates.
