In the world of cryptocurrency, one must be vigilant to avoid financial disaster. A lack of knowledge is not an excuse, that’s why we are here to help you through this article. Many people are unsure how to keep their crypto portfolio healthy, so we have compiled a list of resources for you!
We’ve gathered data from multiple sources about what mistakes individuals make in trading and investing cryptocurrencies. In addition, we’ve also included practical exercises for numerous coins, as well as gathered information which will further help you to build your crypto portfolio.
Let’s start with a simple question: why should you use a portfolio management tool and not just buy and hold?
Why Use A Portfolio Management Tool?
Many people have the misconception that they can just “buy and hold,” but investing in one coin is an extremely risky venture. The theory of diversification is the most powerful idea in finance, yet it is not being utilised nearly enough. Diversification means having assets that increase in value in different ways. With currency, you want to make sure to spread funds out so that one asset declines while another appreciates.
What Are The Risks Of Investing In Just One Coin?
Selling into a Bear Market
If you are just holding one coin, the chance that you’ll sell into a bear market is very high. For example, if you hold 10% of your funds in Bitcoin, then if Bitcoin drops from $10,000 (8000000 Rupees) to $5,000 (400000 Rupees) i.e (50%), you will be selling half your cryptocurrency portfolio and drastically reducing the value of your holdings. That’s why diversification is so important. It provides peace of mind knowing that if one asset falls in value while another appreciates, you’re still going to come out ahead.
In fact, in October 2018 we saw a massive dip in cryptocurrency markets. The overall cryptocurrency market cap fell from $209 billion to $136 billion in a matter of days, with Bitcoin dipping from over $6,000 to under $4,000.
To see how your best crypto portfolio would have performed during that time you can use any number of tools. For example, if you held a portfolio of 10% Bitcoin and 90% Ethereum, the price of both coins would have fallen around 50%, but Ethereum would have appreciated afterwards while Bitcoin continued to drop.
Misalignment Of Personal Goals And Strategy
Another reason you should use a portfolio management tool is because it will allow you to make smarter investment decisions. Humans are not good at making decisions, so by using the right software, you can stay disciplined, avoid emotional decisions and make the right call. For example, if a coin is up 70%, do you sell and take profits or do you hold on for even bigger gains? This type of decision is difficult to make because it involves human emotions.
If you are willing to make a good portfolio by tracking your funds then i will suggest you to check Binocs. They provide the best cryptocurrency portfolio tracking software. By using Binocs you can trade with ease of your fingers.
