The question of how to divide up a portfolio is one of the fundamental problems in any type of investment. Is it more prudent to invest heavily in one asset or to diversify across multiple? Depending on your investment style, both can be argued by investors as a method of hedging your bets. However, at the end of the day, there are pros and cons to both sides.
Juggling multiple investments is often tricky to do. Because each coin lives within its own market, with different market caps, market lives, internal standards and usability, investing in several requires a lot of attention because you must monitor each separately.
However, if you are willing to take on the challenge and make strategic choices, you are more likely to invest in a coin that will take off. Many of the alternative coins, known as altcoins, experience frequent peaks and valleys – it is only by investing in a number of them that you can increase your chances of hitting the jackpot
Alternatively, you can invest in a single currency that you consider a stable and safe investment. These are often attached to fiat currencies like the US dollar, British sterling or European euro. These are often referred to as stablecoins because their value is tied to the stability of a physical currency.
There are many examples of these, including Tether, Binance, USD Coin and LUNA. These are a safe bet for those who choose to invest in a single coin.
As stated, one such currency is Terra, crypto market name LUNA, which is a stablecoin based on the US dollar. It is now experiencing a renewal because it has had some volatile moments, such as the bank crash of May 2022. However, because it is tethered to the USD, it has more stability than most. It is also being accepted by many dApps, which helps to establish its legitimacy because it legitimizes it as a usable currency with applications outside the blockchain. It is a currency that will likely outlast many others.
Regardless of your choice, there are still rules you should follow when assessing your crypto investment. First and foremost, you must do your own research and learn. While listening to others (via articles, podcasts and videos) provides essential context and guidance, it is your money at the end of the day and you must feel confident in your choices.
Also, having done your research, you are less likely to back out of an investment when there are market fluctuations because you will have faith in your critical thinking and reasoning for that choice of crypto – a different scenario than if you had only bought it because your favorite Instagram influencer encouraged it.
Part of doing your own research is also understanding how the elements of cryptocurrency work. When you know the basic building blocks of the industry, such as market caps, staking, mining and the blockchain, you will make more strategic investments because you know how the system works.
For example, would you rather invest in Bitcoin? An altcoin like Dogecoin? Or a stablecoin like LUNA? While it is an option to blindly invest in a coin that is performing well, you will feel far more secure in your decision when you understand how transactions are recorded on the blockchain or how different coins have different ultimate supplies on the market. Education is never a bad thing, and this could not be more true for the world of crypto investing.
Finally, follow the cardinal rule of investing: only invest what you are willing to lose. This advice is incredibly important for all types of investing – but especially for cryptocurrency because, unless it is linked to a fiat currency, there is very little regulation, and the investment authority is a set of decentralized computers.
Luckily, the crypto investing world is very talented in auditing communities and identifying bad actors. However, if you do not know how these systems work, you can make unsecured investments. If one combines these three pieces of advice: educate yourself on your chosen currencies, understand how the components of the investment cycle work and only put in what you can afford, you will have a very successful investment journey.