How to Diversify Your Crypto Investment Portfolio

It’s not safe to put all your funds in one cryptocurrency asset.

Many people have turned to crypto investment option with the hope of making lucrative earnings from the market.

Investing in cryptocurrencies can make you wealthy from the huge profits, but not without the risks that are involve.

Crypto investing is a highly speculative endeavor, and as an investor, you always have to be prepared to lose money.

However, you also stand to earn big in the volatile and fast-moving market by diversifying your investment portfolio.

In this guide, we’ll discuss the various diversification strategies you can employ to create a robust and profitable crypto portfolio.

Let’s get started.

How to diversify crypto portfolio

If you’re a long-term investor, you need to devise a definite plan for diversifying your crypto portfolio.

You have to be sure that your portfolio has variety of assets with different levels of risk and investment rewards.

The best crypto diversification strategy is investing in different crypto assets in order of the risk against their reward potentials.

As such, you can allocate a higher portion of your investments in more stable assets, then spread the rest of your investment in high-risk-high-return assets.

You can allocate 80% of your investment fund to stable but lower reward assets, then 20% to assets with higher risk and return potential.

Now that you know how you can diversify your crypto portfolio while investing, let’s take a into the best strategies to employ.

Best crypto diversification strategies

Below are some of the tried-and-tested strategies you can introduce to ensure a profitable crypto diversification portfolio.

Diversify by type of cryptocurrency

You can diversify your investment portfolio by choosing the cryptocurrencies available on a platform.

For instance, you can choose whether to invest in coins or tokens.

If you choose crypto-coins, you can further diversify your investment between Bitcoin and altcoins.

When choosing crypto-coins and tokens to invest in, you can consider their current prices, how they performed previously and expected performance.

Diversifying by industry

Diversifying your crypto portfolio by industry will help you avoid market fluctuations and ensure that your investments are profitable.

Some industries offering opportunities include banking and financial services, healthcare, manufacturing, telecommunication etc.

If you choose to use industry-specific strategy, you must consider the market capitalization of the companies offering those opportunities.

Time-based diversification

Timing when to enter and exit a cryptocurrency market is a strategy many investors adopt most times.

It simply involves diversifying your assets only when a market is favorable to avoid making losses on investment.

Time diversification requires you to have current crypto market news at your fingertips, so you can easily select the suitable interval to make a move.

What is a crypto portfolio?

A cryptocurrency portfolio is a collection of different cryptocurrencies owned by an investor or broker.

These portfolios typically contain a variety of altcoins and crypto financial products.

It’s pretty similar to a traditional investment portfolio, except that you’re only sticking to one asset class.

You can track your portfolio manually using a spreadsheet, or use a specialized tracker to calculate your holdings and profits.

What is crypto portfolio diversification?

Diversifying your cryptocurrency portfolio is a key part of managing your investments to avoid exposure to a single investment and asset class risks.

Which is the best diversified crypto portfolio example?

Here’s an example of 40/30/30, with 40% allocation for safe cryptos, 30% to average risk-average return cryptos, and 30% going to highest risk with a high return potential cryptos.

Bitcoin (BTC) – 25%, Ethereum (ETH) – 15%, Binance Coin – 7.5%, Cardano (ADA) – 10%, Solana (SOL) – 10%, Chainlink (LINK)- 5%, Sandbox (SAND) – 10%, ApeCoin (APE) – 5%, Polygon (MATIC) – 2.5%, Tron (TRX) – 2.5%, Cosmos (ATOM) – 5% and
Shiba Inu (SHIB) -2.5%.

Closing thoughts

As a long-term crypto investor, you want to consider every possible way to avoid loss and pocket every possible profit.

Diversifying your cryptocurrency portfolio allows you to prepare for highs and lows of the market fluctuations in advance.

In other words, it’s always good to find a crypto diversification strategy that matches your investment goals.

Leaving your cryptocurrency in an online exchange wallet could be putting them at risk.

Since crypto diversification is mostly about long-term strategy, you should also invest in a reliable hardware wallet.

These type of wallets are the most secured, because they do not need internet connection to store your investments.

If you have enough finance to invest in securing your crypto-assets, I’ll recommend Ledger wallets due to their security features.

You can read my review on Ledger Nano X, and Ledger Stax wallets to understand why I strongly choose them for you.

About The 'Staunch

Henry is an accountant that turned cryptopreneur to pursue his crypto and defi interest. He founded this site to show you how to invest safely in these kind of assets using his over-the-years experience. When he's not reading, he will then be writing guides and reviews on cryptocurrency investments.