How to properly manage your cryptocurrency portfolio? 4 essential tips to follow

Being part of the crypto community means one thing: you have the opportunity to talk to many people, to help them find answers to their questions about whether to invest in a particular project or not. But simply seeking investment advice or expert advice is not always plausible.

What worked for others may not always work for you. This is why it is also essential that you have designed the investment strategy that can help you maintain a balanced cryptocurrency portfolio .

Below, we have discussed some of the easy ways to achieve your cryptocurrency investment goals with the help of an effective portfolio diversification strategy. But before talking about it, we will explain what a cryptocurrency wallet is .

What is a cryptocurrency wallet?

Simply put, all the coins and tokens you own represent your cryptocurrency portfolio. For example, if you own ten different assets such as Bitcoin, ETH, DOGE, USDT, etc., your portfolio is made up of those particular assets. The value of your wallet depends entirely on the current market price of all the cryptocurrencies you own.

If you have just started investing in cryptocurrencies , chances are you only have one asset in your portfolio. When you start investing in more cryptocurrencies, your portfolio tends to diversify.

Why You Should Have a Diversified Cryptocurrency Portfolio

There is a common misconception among beginners who have just started investing in cryptocurrencies. Many of them believe that just holding a few bitcoins will make them millionaires in the future. Of course, investing in bitcoin can be a good place to start. But you also have to take into account that the crypto ecosystem is much larger than Bitcoin.

There was a time when investors were extremely bullish on bitcoin. At the start of 2021, bitcoin’s value skyrocketed like never before, and the world’s largest cryptocurrency by market capitalization recorded its ATH of ,000 in April (ATH = All Time High , the highest price ever reached) . What followed was a nose-down fall. The market was rocked by a sharp decline, followed by debates over bitcoin’s power consumption.

Diversity is the key to success

One of the main benefits of a balanced cryptocurrency portfolio is diversity . If you continue to hold on to bitcoin, for example, you will be highly prone to extreme highs and lows. As an investor, it’s important that your cryptocurrency portfolio also includes altcoins , especially if you don’t want to experience the market mood swings triggered by bitcoin’s extreme volatility at times.

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Why You Should Have a Diversified Cryptocurrency Portfolio

Always keep your eyes wide open

The future is not always as certain as we wish. In fact, it’s quite the opposite. When you have a diversified portfolio, you are essentially more likely to choose an asset that you believe is likely to perform better than bitcoin in the future.

Although there is never a guarantee that this will indeed be the case, you will at least be ready to try your luck with other coins and tokens. That said, always research different cryptocurrencies and keep an eye out for projects that can solve real-world problems.

Rebalance your cryptocurrency portfolio

Having a diversified portfolio means you have that much more freedom to use the gains from your best performing asset to rebalance your portfolio.

For example, you have three types of assets in your wallet: Coin A (25%), Coin B (25%) and Coin C (50%). You now decide to sell a portion (5% each) of coins A and B to buy more coins C, which currently make up 60% of your portfolio. As the value of coin C increases, you decide to sell 10% of coin C to buy coins A and B.

This way, you can rebalance your cryptocurrency portfolio using earnings from your best performing assets.

Ways to effectively manage your cryptocurrency portfolio

Recurring purchases by fixed sums (APL)

Dollar -Cost Averaging (DCA) is an investment strategy in which you divide your investment into a fixed number of periodic investments to reduce the impact of volatility on your overall investment. As DCA is a long-term investment strategy, the lesser impact of volatility and price averaging allows your crypto portfolio to experience more positive and sustainable growth over a longer period of time.

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For example, you have €1000 to invest in bitcoin, but you observe a lot of volatility in the market. Here you can play smart and divide the money into five equal parts of €200 each and invest each part in Bitcoin on a fixed date, every month for five months. DCA can be a good investment strategy when the market is bearish. So you might end up spending less than you might have initially spent when the market was bullish five months ago.

Crypto Portfolio Tracker

You may have different assets in different wallets. Therefore, monitoring all your assets and keeping everything organized can be difficult. Therefore, it is very important to track your cryptocurrency portfolio . A cryptocurrency portfolio tracker could be an app or website that allows users to track price changes of different assets they own. This way you can manage your cryptocurrency portfolio properly and more efficiently.

Cryptocurrency portfolio tracking apps usually integrate with different wallets or even exchanges where you can easily trade your assets. You may consider some of the following popular cryptocurrency wallet tracker apps:

  • CoinStats
  • Quadency
  • CoinTracker
  • CoinMarketCap
Cryptocurrency portfolio tracker app

Control your emotions

Extreme fear or greed among investors can make the cryptocurrency market very vulnerable to drastic ups and downs. Also, blockchain is relatively new. That said, many developments are underway in this area. However, don’t let the hype surrounding this technology take over your emotions. Always try to be more realistic about your cryptocurrency investments and evaluate projects that solve a significant problem.

Investors should remain calm when fear or greed is extreme in the cryptocurrency market, which often leads to situations of extreme panic and uncertainty. Another reason why many traders fail to properly manage their crypto portfolio is FOMO (Fear of missing out) , which is triggered by their emotional overload. Peer pressure is another reason why many newcomers usually make hasty investment decisions and buy an asset at high prices.

It is natural that a price correction always follows the rise in asset values. As an investor, having a plan and sticking to it can be a good strategy . In fact, successful investors are known for their ability to keep their emotions in check when it comes to their investment plans and goals. Technical analysis helps investors think more logically about their investment decisions and exercise more discipline in their trading strategies.

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Think about your exit plan first

As the saying goes, all good things come to an end. It means that nothing lasts forever, and all things and situations are temporary. Yes, thinking about your exit plan before entering the market can be a compelling investment and portfolio management strategy . Successfully executing a trade and recording profits makes investors feel good, happy and motivated by their decisions.

However, the absence of an exit strategy often encourages investors to hold their position for an extended period, even if it means incurring losses. Situations like these can be detrimental to the management of your cryptocurrency portfolio and can also hamper your long-term investment strategies. Successful investors tend to think about their exit strategy every step of the way, even before entering the market.

Points to remember to properly manage your cryptocurrency portfolio

Managing a cryptocurrency portfolio doesn’t have to be complicated. However, it is important to have a rock-solid plan for how much you want to invest and in which assets.

Clarity in your thought process helps you realize profits and prevents you from making hasty decisions. Balancing and diversifying your cryptocurrency portfolio is another good strategy you should consider for long-term growth and sustainability. You can use crypto portfolio trackers to monitor the daily price, volume, and market capitalization of assets in your portfolio.

If you don’t want to invest all your savings at once, you can opt for Dollar-Cost Averaging and build your portfolio over the long term. However, do your own research on the cryptocurrency coins and tokens you want to invest in.

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