Guidelines for creating a diversified cryptocurrency portfolio

Guidelines for creating a diversified cryptocurrency portfolio

Cryptocurrency is one of the sought-after investment instruments in the market these days. The continuous surge in the Bitcoin price is attracting the interests of more investors. Like other avenues, cryptocurrency also needs to be approached meticulously as it is also a great investment opportunity. One of the ways to escalate your crypto profit is diversification, and we have outlined the best tips leveraging which you can successfully diversify your portfolio.

Conduct a thorough research

Before investing in a cryptocurrency, it is indispensable to understand different coins along with the fundamentals behind them. There are ample resources and tools to comprehend and monitor the crypto market, respectively. You can also stay acquainted with the market changes and new trends based on live prices of the coin using these tools. Some sites specifically shed light on investment-related crypto topics to provide the latest insights on the crypto market. You can learn technical indicators to use, the fundamentals of the coin you want to invest in, and of course, major announcements and imminent changes. Simultaneously, look for a reliable bitcoin trading platform to achieve the best possible outcomes.

Join a crypto community

To turn from a novice to experienced crypto investors, joining online communities of crypto investors and evangelists is the best approach. These entities continually broach a crypto related topic to discuss, following which you can navigate your way around the crypto sphere. You can also garner knowledge about how to choose the best crypto coin exchange and create an account to maintain a diversified cryptocurrency portfolio from these communities. To take your investment and trades to the next level, you can copy the trades of other investors.

Understand Your Risk Profile

Of course, always copying the trades and investments of others is not the best approach to making profits. Understanding the fundamentals of crypto investment is paramount to be able to make your own investment decisions, diversify your investment portfolio and cover your risk profile. You also have to follow some golden trading rules to leverage the lucrative crypto market. These rules will also help you to figure out how much you are willing to risk to achieve your target profit.

Build a Strong Foundation

You need to build a strong foundation before effectively diversifying your investment portfolio. This means counting on the top 10 cryptocurrencies of the market, including Bitcoin, Ethereum, Litecoin, Ripple etc.

While building a crypto foundation for your portfolio, ensure to determine the growth potential of your base cryptocurrencies. Focus on coins having long-term growth potential to create a portfolio. Once you place all the components, you can invest in other coins available in the crypto ecosystem and diversify your crypto portfolio. Simultaneously, you can invest more in existing coins that you think can yield higher gains and become a renowned investor in the market.

Everything you need to know about cryptocurrency trading pairs – An expert’s take

Everything you need to know about cryptocurrency trading pairs – An expert’s take

Trading cryptocurrencies is a little different than trading other assets such as commodities or stocks. While most trading operations are akin to one another, and even indicators can be reused, there is one metric i.e. trading pairs that differ crypto trading from stock trading.

Cryptocurrencies are usually traded against other cryptocurrencies, and if you are not well-versed in trading pairs, then this article will help you to garner in-depth knowledge of this key element of crypto trading.

What is a cryptocurrency trading pair?

The term “trading pairs” describes a trade between two different cryptocurrencies. In most cases, people use BTC to trade against another cryptocurrency on a digital asset/bitcoin trading platform, but there are many other pairs that you can leverage.

How do trading pairs work?

Trading pairs come in handy to establish the value of a cryptocurrency when it is traded against another cryptocurrency. It generally works by comparing the value of an asset for another. Let’s understand this phenomenon with a simple example:

Suppose, there is a guy named Eric who possesses one BTC and wants to purchase Ethereum. He signs up on a digital asset exchange platform and navigates towards the ETH/BTC trading pair. The exchange then displays the current value of Ethereum and if Eric agrees to its price, he places an order to sell half of his BTC for ETH.

ERIC was able to execute this trade because he already owned bitcoin, which was a base trading pair. If he had XRP instead of BTC but there is no trading pair on the exchange for XRP, then his trade would look different. So, make sure to choose the best crypto exchange that offers every kind of crypto trading pair to facilitate quick trading.

What is the difference between crypto trading pairs?

Though there are various trading pairs on an exchange which works the same way, you must be aware that the value for each pairing could be much different. This is because every pairing has its own bids and asks, and depending on demand, you could pay a premium with these pairs, or maybe get a good deal upon fulfilling a demand. Besides, if you trade using BTC, there are more chances to gain profits.

How to choose a crypto trading pair?

Always make sure to choose a trading pair by taking the current trading volume into consideration in order to reap benefits. If a pair has a low trading volume, then you could have to wait for a long time to find the perfect match. So, count on a trading pair which has a high trading volume to make a good deal in a couple of seconds.

Trading pairs base currency

The base currency is one that is deemed as a common trading pair on a cryptocoin exchange. In most cases, base currency typically comprises BTC and ETH as they are the most popular cryptocurrencies one could invest in. However, some exchanges also offer their own base currencies. This could include ZedXe’s ZFL, which is its own native token.

Different exchanges accept different base currencies. You can check the base currency pairs available on an exchange to find a perfect pair for you.

Correlation between cryptocurrency trading pairs

Some crypto trading pairs have a certain value correlation where they follow each other. Since Bitcoin has gained the most momentum in the crypto market, many pairs tend to follow this maiden currency, but sometimes there is a certain deviation. This can only be true if you are using an exchange or a pairing having low trader count. In this scenario, all the demands can be fulfilled within bitcoin base currency, which in turn, lowers the liquidity of other pairings.

Cryptocurrencies are rapidly gaining mass adoption as they offer enormous benefits to new and experienced traders. But it is paramount to invest in a cryptocurrency having high liquidity and choose the best trading pair to harness the potential of the cryptocoin market.