Diversifying your assets is one of the most important things when investing and this goes for cryptocurrencies as well. While everyone should hold some Bitcoin, it’s not the only game in town, and there are tons of other projects that have more potential for growth that could give you far greater returns in the long run.
Putting all your eggs in the same basket is never a good idea, and you never know what could happen with Bitcoin, so it’s always better to keep your eye open for other options and hold a healthy mix of currencies. Let’s take a look at a few tips that will allow you to build a solid portfolio.
Understand the Different Types of Crypto
One of the things you should know is that cryptocurrencies can be very different from another and are not all like Bitcoin. You have cryptocurrencies like Ether, for instance, that are meant to be used over a specific network. People can use Ether, Ethereum’s proprietary coin, to power applications over their blockchain. This gives Ether something that Bitcoin doesn’t have: intrinsic value.
You also have coins like XRP that are made to facilitate global transfers or coins like Monero that bank on privacy. Understanding what different cryptos do will allow you to judge the value of a coin better. You can also choose coins based on projects you’re passionate about.
Find a Solid Exchange
You will also need to find a good exchange to buy cryptocurrencies. You can either go for a peer-to-peer (P2P) exchange or a centralized one. Both options have their pros and cons. P2P exchanges give you more transparency and are much cheaper to use. Centralized exchanges, however, are considered to be a bit safer and prices also tend to be easier and more stable. It’s up to you to find which option is the best for you.
You should also know that you don’t necessarily have to buy coins to build a portfolio. You can also mine Bitcoin and other cryptocurrencies if you want. This could be a great option if you’re ready to make the investment and if electricity is cheap where you live.
If you want to learn more about crypto mining, you should check out this Bitcoin mining 101 guide by Paxful. You’ll learn how Bitcoin mining works in detail and what kind of investment you’ll need to make. It explains the process of setting up a mining operation step by step and a few tips for building a mining strategy as well.
Start Looking for Well-Known and More Obscure Coins
It’s always better to have a mix of high and low market cap coins in your portfolio. Coins with a smaller market cap have much more room to grow and some might explode overnight. Coins like Bitcoin, on the other hand, are starting to stabilize, which makes them a better option for the long term.
Everyone should hold Bitcoin and Ethereum in their portfolio. These are the two biggest coins in terms of market cap and the most established. Other top coins to consider include XRP, Litecoin, Cardano, and Monero.
If you’re going to go for small market cap coins, you should look at the white paper first and look for case use and proof of concept. Avoid joke coins like Dogecoin at all costs as their price is based purely on speculation. Only invest in what you understand and believe in.