BlogCommunityHow to Wisely Invest in Cryptocurrencies?

How to Wisely Invest in Cryptocurrencies?

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You will often hear about bitcoin and other cryptocurrencies as a great way to lose your money. But it’s quite the opposite unless you invest blindly. 

The crypto industry is highly volatile, on the one hand, because governments are slowly implementing their regulation, but also because many projects have a very short lifespan. 

If we take the 20 largest crypto-caps identified in early 2016, only several are still firmly established. Most dropped out due to weak fundamentals and were outnumbered by others. 

And among the latter, it is likely that many experience the same fate. How then to invest intelligently?

Building your crypto portfolio – diversify to limit risks

Building a future-proof portfolio is no different from traditional finance: you need to diversify to limit risk while taking advantage of the growth of lesser-known assets. 

Five years ago, a traditional investor could have invested a large part of his capital in Google, bet a small part on companies with high potential like Netflix and Tesla, and would have bet a tiny amount on an almost unknown start-up. In cryptos, it’s the same.

Once you check the broker review and opt for the crypto platform( essential choice to make), define how much you want to invest. Please note: it should not exceed the amount you are prepared to lose. 

This is important for continuing to cover your daily living expenses at the end of the month. Once this amount is defined, we recommend investing at least 50% in the least risky assets.

50% in the safest assets (low risk)

Bitcoin

It may make you smile to associate Bitcoin with a “safe” category. But the first of the cryptocurrencies is much more robust than the others (its protocol makes it the most resistant to cyberattacks).

It is a global crypto-standard, and you can trade it on any marketplace. It also serves as a benchmark: to buy other cryptocurrencies, you will need not dollars or euros but bitcoins. On the other hand, its status as the first cryptocurrency in history gives it some legitimacy for a while.

Ether

The cryptocurrency used on the Ethereum protocol has many qualities. Many large companies (Microsoft, UBS, Intel, etc.) have joined the Ethereum Enterprise Alliance, an NGO that supports its development.

Ethereum has more developers than any other protocol, and its community is the largest. Finally, almost all cryptocurrency fundraising is Ethereum based and requires ethers. Its value could therefore continue to increase.

30% in the largest caps (moderate risk)

We recommend favoring assets with the largest capitalizations and which are already widely used. Some of these are, for example, Bitcoin Cash or Litecoin. These two alternatives to Bitcoin as a payment method are interesting for two reasons.

On the one hand, you will be able to profit from the rise of one of them, but you will also reduce your exposure to Bitcoin if it loses influence. It is always useful to put some money into projects that compete with those you support. 

15% in reputable assets that have not yet been proven 

Focus on projects with a good reputation in the sector but whose future is not yet certain. It may be the case with Ripple (banking blockchain): its capitalization is very important (the third largest in the world), and its managers have entered into numerous agreements with major banks. 

Likewise, it may be worth investing in alternatives to the Ethereum protocol to reduce your dependence on it. Among them, we can mention NEO or Cardano.

5% in highly speculative assets (high risk)

This category boils down to a roll of the dice. Have you spotted a crypto-project of which you are the only one who can praise the merits? Do not expect much from it; you will see what happens. In addition to the fun of embarking on a full study of a near-unknown project, it will improve your way of approaching the sector.

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