Learn more about how Bitcoin fits within your investment portfolio and discover the altcoins that could help you create balance to limit the risk you expose your finance to.
Crypto enthusiasts often refer to Bitcoin as digital gold because it’s a potential store of value and the BITC price remains the highest in the crypto sector, despite the bear market. If you’re new to the market and trying to figure out if Bitcoin truly has value and it’s a worthy addition to your portfolio, it’s crucial to understand that there are two types of value.
– Intrinsic value when an asset has overt utility and produces cash flow.
– Monetary value that exists even when the asset lacks intrinsic value. Gemstones, metals, and artwork usually have a monetary value.
Bitcoin can be used as an asset with monetary value because it boosts the portfolio’s diversification and has a low correlation to traditional assets. When you allocate a part of your investment fund to Bitcoin, you increase the chance of return and risk because it’s a volatile asset. The first cryptocurrency achieved institutional asset class status in less than 10 years because it has a history of positive returns.
As an investor, you know that the average portfolio presents a degree of inherent systemic risk in the financial system, and by adding cryptocurrencies like Bitcoin to it, you diversify some of this risk.
The majority of investors add Bitcoin to their portfolio for two reasons (and most likely, you did the same).
– It’s a macroeconomic inflation hedge because it’s a scarce asset and its supply is resistant to government control.
– It’s a growth asset that has outperformed several traditional assets and has growth potential.
How much crypto should you own?
Adding Bitcoin to your portfolio can positively impact your returns in the long run. A report that analysed the impact of Bitcoin on a diversified portfolio over 6 years showed that it improved returns by 24% compared to a traditional portfolio lacking digital currencies. Even a tiny amount of crypto can greatly impact the profit.
Assuming that you already have Bitcoin in your portfolio, and now you’re looking for altcoins to diversify it, you might wonder how much crypto you should add to balance your funds properly. Investment experts agree that it’s best to keep the cryptocurrencies at no more than 5% of the portfolio’s overall value. The amount is small enough to limit the risk associated with high volatility but high enough to trigger significant profit if the prices rise. Suppose you’re comfortable spending more, you can increase the allocations for crypto to 20%. How much cryptocurrency you welcome to your portfolio depends on your belief in the particular projects and risk tolerance.
Altcoins that allow you to create a well-balanced portfolio
Considering how many digital coins are in circulation, picking the best altcoins for creating a well-balanced portfolio is no easy feat. You should research the key metrics surrounding each project to determine which one is a better fit.
Here are the experts’ recommendations.
Ethereum is the most well-known altcoin and needs no introduction because it has become the go-to for decentralised application developers. The blockchain’s smart contract feature provides the foundation for developing DApps. And considering that the network has successfully completed the Merge and has extensive use cases, it’s definitely the hottest digital currency to buy in 2023. Even if its price has dropped in the last few months because the crypto sector entered a bear phase, it showed in the previous bull market that it has the potential to reach sky-high values.
Crypto enthusiasts think ApeCoin is the hottest altcoin to have in your portfolio in 2023 because it’s linked to the famous Bored Ape Yacht Club NFT collection. BAYC is one of the most-searched NFTs of the moment and has reached cult status in the sector. Its status triggered a surge in ApeCoin’s price, and if the NFT continues to draw attention, it’ll most likely impact the coin’s price positively.
Even if Theta has the best utility cases in the sector, it’s still highly undervalued, so it’s the ideal time to buy it, before its price explodes. Experienced crypto investors have heard of this altcoin which entered the sector the last year, and have purchased it to diversify their portfolios, recognising its potential. It’s believed to have the best utility cases because it aims to revolutionise how video streaming functions and decentralise the process.
The Sandbox project specialises in the Metaverse allowing users to explore the Sandbox network, interact and communicate. Users within the Sandbox Metaverse can create and customise characters they can use to play games. When they accomplish particular tasks, they earn in-game currency. The Sandbox network is also home to several NFT projects. Besides these features, the ecosystem allows users to use SAND tokens to buy land in the Metaverse, where they can build property and sell assets on the open marketplace.
Another popular project that would make a worthy addition to any crypto portfolio is Uniswap. The network was founded in 2018 and introduced the concept of decentralised trading in the sector for the first time. It allows users to buy and sell digital currencies without using a centralised exchange. Uniswap has brought innovation in the niche by using an automated market maker model that determines cryptocurrency prices based on a series of factors like market capitalization, volume, and demand.
If you want to invest in Metaverse coins, Decentraland is also a great option because it’s one of the most sought-after projects in the niche. The number of users continues to grow daily, and so does the number of transactions completed within the network. Decentraland has facilitated several huge digital real estate trades over the last few months. The ecosystem enables users to buy plots of land where they can build real estate.
When buying altcoins, remember that their prices don’t dictate their total valuation. Numerous other features make them worthy of acquisition.
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