How to build a balanced crypto portfolio

build a balanced crypto portfolio

Investing in cryptocurrency is easy: just sign up to an exchange and purchase your first Bitcoin (BTC) or Ethereum (ETH). Maybe dabble in some altcoins. Diversify a little with some stablecoins. The list of approaches is endless.

And it’s very easy to get started using the Nash app.

However, just being in the market does not in itself equal success.

You can improve your chances by diversifying and balancing your crypto portfolio.

What is a crypto portfolio?

Let’s rewind a little for the uninitiated.

A crypto portfolio is the collection of crypto assets that are managed by one investor. It will usually include numerous different assets, but most incorporate at least some Bitcoin and Ethereum, as well as some smaller “altcoins” (anything other than BTC and ETH).

The portfolio is usually tracked via a spreadsheet or a specialist piece of software known as a tracker.

To reduce overall risk, it’s important for an investor to have a well-balanced portfolio, meaning investing in a number of different products, monitoring their progress and diversifying accordingly.

Why diversify your crypto portfolio?

Like stocks, bonds and precious metals, cryptocurrency is one asset class.

Diversification within that class means investing in a number of different crypto products that are used in different ways for different purposes.

Diversifying your crypto portfolio is crucial to hedge against the risks involved: the growth of some or your assets will hopefully outweigh the depreciation of others.

One simple example of a diversified crypto portfolio would be to have 40% Bitcoin, 30% Ethereum, 20% altcoins and 10% stablecoins.

What crypto should you include in your portfolio?

As we mentioned, asset allocation – the relative weight of individual assets – is one of the most important factors influencing the success of a given portfolio. But what types of crypto should you be looking at and which ones should you prioritize?

One of the best ways to look at this is to divide the assets into what we call ‘low-cap’, ‘mid-cap’ and ‘large-cap’ cryptos.

Large-cap cryptos

‘Large-cap’ cryptos refers to the top ten crypto assets by market capitalization.

The most popular of these by far is Bitcoin. It’s the original cryptocurrency and the world’s largest by market cap. It is gradually being adopted into the portfolios of banks and hedge funds, which really helps solidify its status as a buy-and-hold crypto asset.

Bitcoin and Ethereum really are in a league of their own when it comes to market dominance and most serious investors will have a significant percentage of their portfolios invested in these two assets.

‘Mid-cap’ cryptos

Generally, cryptos with a market cap of between $1B and $10B are considered to be ‘mid-cap’.

They are more risky than large-cap cryptos, but not as risky as low-cap cryptos.

When investing in mid-cap cryptos, it’s very important to do your due diligence: if the asset has strong potential to develop with the needs of the market, then it could be a worthwhile investment. Especially given the way the crypto market is expanding.

Low-cap cryptos

Yep, you guessed it: ‘low-cap’ cryptos are assets with a market cap below $1B that have the highest potential risk, but also the highest potential for reward.

As most investors will tell you, if you are punting on the hype of an asset alone then you should be prepared to lose your investment in its entirety. On the flipside, however, you could also experience the incredible 100x gains that crypto has become famous for.

Crypto portfolio examples: the 80/20 rule

A lot of first-time investors follow the 80/20 rule when starting out – and with good reason. It helps minimize any liquidity issues and allows you to make good profits from the sizeable surges at the lower end of the market.

The rule states that 80% of your portfolio should be lodged with large-cap, well-established assets such as Bitcoin and Ethereum.

The other 20% can then be spread amongst mid-cap and low-cap cryptos that offer higher risk and higher reward.

Large-cap, mid-cap and low-cap cryptos are all available on the Nash app. It’s an incredibly user-friendly app that’ll help you get on the crypto ladder in the way that suits you best.

Remember: you should always do your own research when building and diversifying your portfolio. But here’s an example of how the 80-20 rule can work.

An example crypto portfolio using the 80/20 rule:

Bitcoin 40%
Ethereum 30%
Avalanche 7%
Polygon 7%
Curve 5%
Nash 5%
Chainlink 2.5%
Binance Coin 2.5%
QuickSwap 1%

Get the Nash app here.

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DISCLAIMER: This article is for informational purposes only and does not offer professional financial advice. For a full appreciation of investment strategies and risks in your particular situation, please consult a professional.



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