Crypto portfolio management allows you to achieve a risk-adjusted return on your crypto investment. Read further to learn more about crypto portfolio management and its benefits.
The past decade has seen an exponential rise in the number as well as the investment in cryptocurrencies. It has caused significant changes in the financial market. The crypto market is highly rewarding and presents an unprecedented opportunity to make short-term and long-term gains. However, the market is also subject to extreme volatility and frequent fluctuation.
Most retail investors invest in a popular cryptocurrency with hopes of making massive gains. However, it is not advisable to put all your eggs in a single basket. All cryptocurrencies experience a period of high rises and lows. This can cause significant financial losses for the retail investor.
Hence, it is crucial to have a risk-adjusted portfolio of cryptocurrencies.
Crypto portfolio management allows you to generate high incomes while managing your investment risk. Let us understand crypto portfolio management and its many benefits.
Crypto portfolio management
For many people, investing in cryptocurrency means buying a few Bitcoins. However, Bitcoins are just a part of the huge crypto market that consists of more than 6500 currencies.
Your crypto portfolio refers to the unique selection of cryptocurrencies you chose to buy. Investor tries to maximize their returns while reducing their risks. The value of your crypto portfolio depends on the market price of these cryptocurrencies.
However, it is essential to understand that different investors have different risk appetites. Hence, what works for someone else may not work for you.
Crypto portfolio management refers to risk management by creating a unique mix of cryptocurrencies.
Benefits of Crypto Portfolio Management
Some of the benefits of crypto portfolio management are as follows:
1. Diversification
The benefit of a well-balanced portfolio is the diversity it offers. The Crypto market is volatile and highly unregulated. It is very often seen that the price of a cryptocurrency skyrockets and then takes a nosedive.
If you invest in a single cryptocurrency, the changes in the market value of the currency will directly impact your investment. As a retail investor, you may not be able to accommodate such fluctuations, and it can destroy your wealth.
Hence, it is advisable to diversify into a few different cryptocurrencies. This will enable the downfall in the value of one currency to be balanced by the rise in others.
2. More chances of selecting an outperforming asset
When you invest in different cryptocurrencies, you increase your chances of picking an outperforming asset. Years ago, when bitcoin was launched, nobody could anticipate its capability and future market value.
Similarly, there are a few cryptocurrencies that may achieve exponential growth in future years. Crypto portfolio management increases your chances of picking such currency.
3. Rebalance your portfolio
Crypto portfolio management allows you to rebalance your portfolio to help you maintain an adequate ratio of the asset. The gains in an outperforming cryptocurrency are used to invest in other assets to rebalance your crypto portfolio.
These are some of the benefits of crypto portfolio management.
THE AUTHOR: Bruce Markey
