According to industry experts, people interested in buying cryptocurrency need to learn from ‘angel’ investors. An angel investor is an individual who provides capital for startups to start operations or expand in exchange for equity. Angel investors funds early-stage startups and are used to dealing with projects that may or may not succeed.
In this case, diversifying comes in, whether in the case of being an angel investor or someone interested in going into crypto. However, the novelty of crypto makes diversification more complicated than it would be for more traditional investments, such as stocks. For example, there is the absence of available mutual funds offering broad exposure to the digital asset space.
With these given, there are some strategies and tips savvy investors can use to diversify their crypto investments on platforms like Bitcoin qs and others:
Diversify by market capitalization
Bitcoin is the cryptocurrency with the largest market capitalization, which currently stands at 810 billion dollars;. At the same time, Bitcoin may occupy the most significant chunk of crypto market share; many other altcoins with varying market caps are worth considering.
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Buying a fund
There are relatively a few things to choose from for people looking for the simplicity of a professionally managed fund. But there are a handful of products available to make cryptocurrency more accessible to people most comfortable with traditional investing tools. An exchange-traded fund, for instance, can be held in a brokerage account or used as part of a retirement fund, unlike crypto on its own. Buch such funds also carry fees, offering investors less control over digital assets.
ETFs is an easy way for investors to buy into diversified portfolios of stocks and other assets, while the Securities and Exchange Commission hasn’t approved an ETF that would hold Bitcoin BTCUSD, 1.60 percent, nor any that invests directly in other digital assets. One ETF option for crypto investors is a fund that focuses on cryptocurrencies’ underlying ‘blockchain’ technology. Such funds buy the stock of companies with an emphasis on that sector. Those, however, are not direct investments in cryptocurrency.
Invest in different cryptocurrency blockchains
Blockchain is the technology that allows cryptocurrencies to function. But the capabilities of blockchain platforms go far beyond that, and they are in high demand in nearly every sector because of the solutions the technology enables. One of the most popular blockchains is Ethereum which facilitates the execution of agreements without a third party and allows dApps to be built on its platform. Cardano [ADA] is a competing blockchain that focuses on security, scalability, and efficiency. EOS blockchain specializes in web services, such as cloud storage, dApps, and smart contracts. EOS also supports millions of transactions per second and more straightforward upgrades, including a modification of dApps. And these are just a few examples of the blockchains at the heart of the evolving crypto industry.
Diversify crypto projects by location
Choosing cryptocurrency projects from different places worldwide can expose you to a wider variety of innovations by crypto businesses. However, it is best to steer clear of crypto projects in areas that are banned or restricted and focus on areas where innovation is growing.
Invest in different industries
Cryptocurrency opportunities can be found in different industries like the finance industry and even in the world of video games. Many users are trading virtual assets in a global virtual marketplace. This serves as one of the ways of diversifying your crypto investments.
Diversify by risk level
When constructing a diversified crypto portfolio, one essential thing is to let your risk tolerance be your guide. To balance a crypto portfolio, you may need to start by allocating more to stable cryptos, such as Bitcoin and Ether. You can also add stablecoins to help manage portfolio risk.
You may also like to read, 10 Cryptocurrencies to invest in besides Bitcoin (2022 update).