4 Essential Steps To Diversifying Your Crypto Holdings

Diversifying your crypto holdings is a smart choice for any investor, no matter how small or large their portfolio may be. Crypto markets can be highly volatile and unpredictable, so having multiple investments allows you to spread out the risk of potential losses. Building a diversified portfolio also has the added benefit of potentially increasing returns over time.

Step #1 - Understand Asset Allocation In Regards To Your Risk Tolerance

The first step in creating a diversified crypto portfolio is understanding the concept of asset allocation, which divides your investments into different categories based on their level of risk and expected return. Commonly used categories include cash equivalents (such as stablecoins), popular blue chip cryptocurrencies (like Bitcoin, Ethereum, etc.), and alternative investments (such as ICOs or NFTs).

The amount of each category you choose to invest in should reflect your risk tolerance, with more aggressive investors typically allocating a larger portion of their portfolio to higher-risk investments.

Step #2 - Choose A Variety Of Coins & Tokens

Once you have determined the asset allocation for your portfolio, it’s time to start picking coins and tokens that fit into each category. This can be done by researching individual assets or utilizing crypto index funds, which provide diversified exposure to various digital assets with a single investment.

When investing in individual coins, consider factors such as market capitalization, liquidity, and the project's long-term prospects before making any decisions. Look for asymmetric opportunities that have the potential for great rewards, but still remain within your risk tolerance. This will enable you to receive large profits without having to allocate a major portion of your portfolio to high-risk ventures.

Step #3 - Utilize An Efficient and Free Crypto Portfolio Tracker

Being able to manage crypto assets for free is important for any diversified portfolio. Ideally, you'd want to use a free crypto portfolio management software that doesn't require your private keys. This is because storing your private keys on a third-party platform could leave you vulnerable to security breaches.

Moonrig.io is a free way to monitor multiple crypto assets with a consolidated view. It doesn't require your private keys and it can send you personalized notifications based on price movements, volume changes, and other market trends.

Step #4 - Diversify Your Crypto Holdings Into Different Wallets

The safety of your crypto portfolio is a top priority, so don’t forget to diversify the wallets you use for storing different coins and tokens. If one private key gets exposed, you don’t want all of your coins to be at risk.

The best way to securely store crypto assets is by using a combination of hot wallets, such as custodial services and desktop wallets, and cold storage, which are physical devices used to store crypto offline. Using hot wallets is often preferred for smaller amounts of coins, and cold storage is usually used for bigger amounts.

Final Thoughts

These are just a few tips for diversifying your crypto holdings. Ultimately, it’s up to you as an investor to decide which coins and tokens are right for your portfolio. DYOR and always consider the associated risks before making any investment decisions. Good luck!