How To Invest In The Cryptocurrency Market To Get A Six-Figure Portfolio

Last Updated January 19th 2022

6 Min Read

The wave that blockchain technology has created in the world of finance is unprecedented. Cryptocurrencies are surging in popularity across the world, with institutions and investors acquiring digital assets alike. Bitcoin, for instance, was considered just an interesting phenomenon when it was first introduced in 2009.

Several technicians and developers sensed the future potential of cryptocurrencies in general. However, it did not draw much interest as an investment. Many did not know how to invest in digital assets and what is its potential.

But as the years have passed and thousands of cryptocurrencies have emerged, Bitcoin has remained the most popular and the largest digital asset. This point has come to the attention of investors and speculators as well. Many analysts and institutions consider cryptocurrencies an alternative global currency that will eventually replace fiat currencies such as the USD and the Euro.

Even though the crypto market is volatile in general, it is difficult to ignore the fact that it is lucrative at the same time. Cryptocurrency investments have potentials and risks associated, similar to many other investment assets. If you had invested in Bitcoin back in 2009, you would probably have made millions of dollars in return by now. This makes investors wonder if it is too late to invest in crypto to earn massive returns in the future. The answer is that it is not. It is possible to carefully build a crypto portfolio that could potentially be worth a six-figure number in the coming years.

Remember, if you plan to turn your crypto holdings into six figures, you cannot expect returns in the short term. In every investment approach, a strategy, goal plan, and risk management are necessary factors. It is crucial to building this strategy after understanding the basics of the market. Additionally, investors need to be patient and not rush into traps and investment trends such as FOMO (fear of missing out).

Your goal to build a crypto portfolio should be a safe and slow journey. Following these guidelines could help you invest in the crypto market to get a six-figure portfolio.

Contents:

Evaluate and Allocate Crypto to Your Portfolio Carefully
Choose Your Cryptocurrencies Wisely
Choose a Platform To Buy Your Crypto
Diversify Your Portfolio
In Conclusion

How To Invest In The Cryptocurrency Market To Get A Six-Figure Portfolio

1. Evaluate and Allocate Crypto to Your Portfolio Carefully

The first step of your investment plan is to decide, in advance, how much of the portfolio you want to allocate to cryptocurrency. With recent advances, especially in the price of Bitcoin, it can be tough to make a well-informed decision. Most investments in recent times are driven by greed and fear. Given the progress crypto has made in recent years, remember to keep the greed part under control and be rational while planning the allotment.

Digital assets should ideally occupy a small part of your overall portfolio. It is up to you to decide the exact number. Experts advise an allocation of 5% to 10%. Similar to investing in gold and silver, crypto holdings do not pay dividends or interest. Cryptocurrencies will remain a good investment depending entirely upon their price increasing significantly and staying there for a while.

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2. Choose Your Cryptocurrencies Wisely

Choosing the right investment assets can be trickier than thought initially. It is one of the real complications of crypto trading, especially since there are over 7000 cryptocurrencies out there. Hundreds of digital assets have come and gone already, while the entire concept of cryptocurrency started only about a decade ago.

At the moment, Bitcoin is the largest cryptocurrency. It is also the coin drawing the most adoption and attention. BTC is followed by Ethereum (ETH), Ripple (XRP), Cardano (ADA), etc., as per market cap. Given its dominant position, Bitcoin appears to be the most reliable among all the cryptocurrencies available. It has become nearly synonymous with “cryptocurrency.” Notably, while the mainstream media has been particularly following the price action of Bitcoin, many other coins are performing significantly well.

Because of its fame and first-mover advantage, it is a good idea to allocate a sizable investment to Bitcoin. Other virtual assets should occupy a smaller position in your portfolio. Depending on your prioritize, you could finalize the coins that you believe are likely to surge or perform their historic price movements again.

The crypto market is volatile. Hundreds of cryptocurrencies that have entered the market in the past decade have either faded or disappeared entirely. Essentially, this means that any investment you make could go all the way to zero. This has made investors and traders constantly look for the next big thing, such as non-fungible tokens (NFTs), decentralized finance (DeFi), etc.

3. Choose a Platform To Buy Your Crypto

People cannot buy or sell cryptocurrencies using traditional financial entities like banks. You will have to buy, hold, and sell digital assets on dedicated crypto exchanges. There are decentralized exchanges (DEX) and centralized exchanges available currently.

Some of the most popular and trusted exchanges include Binance, Coinbase, Gemini, Bittrex, Krake, etc. These platforms support a wide variety of assets, and the rates of trading fees differ from exchange to exchange.

Read Also: 5 Best Places to Buy and Sell Cryptocurrency

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

4. Diversify Your Portfolio

Diversification is a key principle of sound investing, and the same rule applies to crypto investments as well. Many investors only hold a single digital asset, like Bitcoin. However, this approach is somewhat flawed if the main goal is to generate sizable returns. An investment in a single asset provides you with 100% of the profits or losses associated with that asset. But, not all crypto gains are equal.

Over a year, there can be a massive difference in gains among the top-performing crypto assets. In simple words, investing in a single asset gives you considerably less exposure to the performance of other well-performing currencies. A consideration that will help your cryptocurrency investment portfolio is to focus on your core competencies and strengths. Ask yourself, for example, if you understand utility tokens well or security tokens. Invest accordingly.

While Bitcoin and Ether are examples of utility tokens, you could also choose to invest in tokens that help you earn passive income. These include crypto protocols such as NEO, Stellar, etc.

As you build your virtual asset portfolio, it is crucial to consider the basic factors of crypto trading. For instance, take the timing element. It is crucial to observe and know what to do when the market goes down and trending downwards.

One popular principle is to buy when the market is down (bears take over) and sell when the market is up (bulls are raging). The key concern here is not about the predictability of market price. Instead, it is about knowing what action to take in the face of prevailing circumstances.

Another essential strategy is to hold. When you have the goal of a long-term return in mind, investors are generally advised to retain their assets and not give in to the selling pressure.

Check Out: 5 Ways To Become A Better Cryptocurrency Investor

In Conclusion

A well-diversified, researched portfolio goes a long way in ensuring success in the ever-growing cryptocurrency markets. There are over 5,000 coins with differing degrees of risks and offerings for investors to choose from.

Having a balanced portfolio with different types of coins could save you from a lot of stress. Keeping the guidelines mentioned above and tips in mind can help you build a six-figure worth crypto portfolio.