“Cryptocurrency is promising, but please invest with caution”!
– Elon Musk
There are many ways to build and grow wealth within the crypto space. One such way is the habit of having a Diversified Crypto Portfolio.
What is a Crypto Portfolio?
A crypto portfolio is a collection of different investments in different crypto projects and tokens. Does that sound too complex☹? Let’s use a simple example;
Imagine Mr Kingsley has $500 in his bank account and he’s interested in investing it in crypto.
He has two options
He can choose to buy just one crypto asset like Bitcoin and hold it in a crypto wallet. At best after a period of 6 months, his investment in bitcoin might have appreciated by say 50% giving him a total of $250 in returns.
He can choose to spread his $500 on five crypto tokens thereby having a portfolio comprising of different crypto tokens(tokens A, B, C, D, E). So $100 can be invested in five different crypto tokens. Hence, Mr Kingsley has a crypto portfolio consisting of $500 invested on five different crypto tokens.
Option 2 is a better Move (Diversified Portfolio)
Option 2 is a smarter move than Option 1 because each of those tokens will appreciate at different percentages over a particular investment period.
A good way of investing in crypto is having a portfolio of different coins. Let’s prove this with a look at four different crypto assets over the last year.
A $500 investment spread over cryptocurrencies such as Terra, Enjin, Ethereum and Sol will have returned 20X over a year. Each of these crypto-assets has experienced a significant increase within the past ten months.
Analysis of Portfolio
Terra token has seen a 7163.33% increase in its price value from January 2021. At the time of creating the NFT Synergy portfolio, the token price was $0.90. Currently, the Terra token price is set at $65.37. A $100 investment will have returned $7163.
Similarly, the Enjin coin has seen a 700% increase in its price value over the past ten months. At the time of portfolio development, the token was priced at $0.34. Since then, its value has increased and is now valued at $2.6. Another $100 investment would have returned $700,
Ether has also experienced an increase of 398.14% since the turn of the year. Ether is currently being traded above $4000 per token. As a result, $100 will return $300.
Sol has increased over the last 7 months with prices going from $7 to $200. That’s over a 2000% increase. So $100 will have returned $2000.
A $500 investment spread over these four crypto tokens at the start of the year will be worth around $10000 presently. This marks a 2000% increase in your diversified portfolio over a period of 1 year.
It is evident from this that investing in just a single token limits your profit potentials. A diversified portfolio simply means “you are not putting all your eggs in one basket”.
For example, assuming Mr Kingsley invested his $500 on just Bitcoin, he would have gotten at best a 300% increase in his portfolio. However, splitting his capital on multiple tokens reduces his risks and increased his profit potential.
The moral of the story- Have a diversified portfolio