When investing in any asset, there is always a risk of their depreciation, but there are ways to help reduce the risks. One of them is diversification. Its meaning is to create an investment portfolio and allocate investments for various assets, writes RBC Crypto.
There is a well-known investment rule – “do not put all your eggs in one basket,” recalled Nikolai Shkilev, founder of the Private Business Club and CEO of the ZELWIN marketplace. According to him, it works when investing not only in traditional financial instruments, but also when dealing with cryptocurrency.
Volatility insurance
Diversification is especially important when investing in highly volatile asset classes, which include cryptocurrencies, explained Maxim Krupyshev, CEO of the crypto payment system Coinspaid. According to him, diversification helps to evenly distribute risks throughout the portfolio and not go into a deep minus if some asset becomes much cheaper.
It must be remembered that any investment in the cryptocurrency market is high-risk, recalled the co-founder of the EXMO cryptocurrency exchange Ivan Petukhovsky. He does not recommend that novice investors enter little-known projects and advises to carefully choose an asset to buy.
Bitcoin dominance
When investing in cryptocurrency, one must take into account the dominance of bitcoin – its share in the total capitalization of cryptocurrencies reflects the market’s tolerance for risk, Maxim Krupyshev noted. The lower the market tolerance for risk, the higher the share of bitcoin in the investment portfolio should be, the expert says. In his opinion, in addition to Bitcoin, the portfolio should include assets from different segments of the crypto market – there should be coins of blockchain projects focused on the creation of smart contracts and decentralized finance, coins of cross-chain projects, tokens of both centralized and decentralized trading platforms, tokens of the largest DeFi projects, especially landing projects, as well as stablecoins.
The dominance of bitcoin plays an important role in the diversification of the portfolio, since this primarily indicates its liquidity, Ivan Petukhovsky emphasized. He argues that it is necessary to balance the investment portfolio in accordance with the share of the main cryptocurrency in the market. The expert also advises to pay attention to the top 10 altcoins. According to him, investors who prefer to invest in assets in the early stages of projects in order to get maximum profit should pay attention to digital coins in which large funds invest or created by such funds.
“In other words, if Microstrategy, for example, invested in the project, success is almost guaranteed,” added the co-founder of the EXMO cryptocurrency exchange.
We increase efficiency
Along with diversification, Nikolai Shkilev always recommends using stop orders, which will help an investor avoid serious losses, even if he does not have the opportunity to constantly monitor quotes.
“The main rule in cryptocurrency is to always place stop orders. The potential identified loss of a partial deposit is normal. The loss of the entire deposit is absolutely unacceptable, ”added the CEO of the ZELWIN marketplace.
As an example, Nikolai Shkilev cited a situation when an investor bought bitcoin for $ 60 thousand, and then the value of a digital coin began to decline. Immediately after the purchase, the expert recommends setting a stop order at $ 55 thousand.If the price of the cryptocurrency began to grow rapidly and reached $ 70-80 thousand, then you need to cancel the old stop order and place a new one, thus securing your profit, the expert added
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