
<p>Investing in cryptocurrency is a complex matter, particularly when the market is inundated with various assets and a growing interest in decentralization. Therefore, investing or trading with only one asset, such as Bitcoin or Ethereum, is no longer feasible, considering the power of altcoins and other assets during market cycles.</p>



<p>That’s why users must learn to allocate their finances in a smart way to withstand volatility and risks, as well as build a safe and long-term portfolio. These are the first tips an investor should know when learning <a href="https://www.binance.com/en/how-to-buy/all-coins">how to buy cryptocurrency</a>, so they can manage uncertainty and time portfolio rebalancing. ;</p>



<p>Additionally, investors can achieve maximum success by exploring multiple strategies simultaneously, enabling them to tap into new assets. Here’s how.</p>



<h2 class="wp-block-heading">Diversify based on asset types</h2>



<p>While cryptocurrency is the term covering all digital money, each asset is different and falls under a special category according to its usage. <a href="https://bitcoinmagazine.com/news/paul-tudor-jones-bitcoin-gold-stocks-are-the-best-portfolio-to-fight-inflation">Bitcoin</a>, for example, is a store of value asset and is mostly used in transactional purposes. On the other hand, Ethereum’s usage also directs to decentralized ecosystems, exchanges, and applications.</p>



<p>These are some of the most important assets to know:</p>



<ul class="wp-block-list">
<li>Payment cryptocurrencies: meme coins, stablecoins, privacy coins;</li>



<li>Infrastructure cryptocurrencies for application development, scaling, and communication;</li>



<li>Financial cryptocurrencies for decentralized exchanges, money markets, and asset management;</li>



<li>Media and entertainment cryptocurrencies for the metaverse, NFTs, and play-to-earn games;</li>
</ul>



<p>The benefits of multiple areas in the market ensure fewer risks, as in the case where one sector falls, the rest remain thriving.</p>



<h2 class="wp-block-heading">Rebalance portfolio in a few steps</h2>



<p>Crypto portfolio rebalancing is either periodic (time-based) or threshold-based. This means that you can choose to rebalance the portfolio asset allocation daily, weekly, or monthly to enforce discipline. However, this method may be inefficient at times since you might miss considerable price swings.</p>



<p>Or, you could rebalance the portfolio when the value of an asset goes past a threshold you have set. This makes it easy to trade only when needed, but it requires constant monitoring. Regardless of your choice, rebalancing is quite simple:</p>



<ul class="wp-block-list">
<li>Define your goals based on your financial condition and risk tolerance;</li>



<li>You chose the most efficient strategy for the portfolio assets;</li>



<li>You calculate the drift and required trades;</li>



<li>You execute the trades, either manually or automatically through a special tool;</li>
</ul>



<h2 class="wp-block-heading">Try the 60/30/10 strategy</h2>



<p>Whether you’re a beginner or aim to be a long-term investor in crypto, trying new methods to diversify your portfolio can help you gain more experience and secure your portfolio. According to Binance.com Research, &#8220;Although volatility traders may see continued calm next month, as seasonal statistics show October and November are historically the two months with the lowest Bitcoin volatility, for price action traders, October is also known for reversing September&#8217;s weakness.&#8221;</p>



<p>Therefore, users must be prepared by adopting the 60/30/10 portfolio strategy that includes:</p>



<ul class="wp-block-list">
<li>60% blue-chip cryptocurrency, or approximately 40% to Bitcoin and 20% to Ethereum. This is a foundational investment that offers high liquidity and deep market acceptance, which reduces risks;</li>



<li>20% satellite investments: or large-cap altcoins, DeFi tokens, Layer-2 protocols, or assets that rebalance frequently and serve multiple uses;</li>



<li>10% stablecoins and tokenized assets: or USD-backed stablecoins that ensure yield and tokenized treasuries that support enhanced entries in challenging market pullbacks;</li>
</ul>



<h2 class="wp-block-heading">Manage risks</h2>



<p>Although proper portfolio diversification provides a certain level of safety against sudden price changes, it doesn’t entirely secure your assets, so you must continue to manage risks. This means setting realistic goals and maintaining a comfort level with volatility, so you can align your goals with your risk appetite.</p>



<p>You can also use stop-loss orders and take-profit orders, which can be set automatically for the software to sell a coin if it reaches a predetermined price. However, for that to have an impact, you must avoid making emotional decisions. This is one of the most challenging struggles users face, as the Fear and Greed index sometimes reveals how people’s sentiment clouds their judgment, preventing them from making an informed decision.</p>



<p>FOMO (fear of missing out) is a significant issue in the cryptocurrency world, particularly affecting crypto holders. Unfortunately, the pressure of social media posts and an increasing number of crypto gurus can easily influence people’s decision-making skills. FOMO is best managed by taking the time to research the market and considering only data-driven strategies, including fundamental analysis.</p>



<h2 class="wp-block-heading">Know the risks</h2>



<p>Besides navigating volatility and FOMO, there are several other vulnerabilities in the crypto market that you should be wary of. Some of the most prominent include the regulatory and legal uncertainty, which have the potential to impact the value of crypto. That’s because regulators may restrict or limit crypto functionalities in the process of defining a thorough legal framework.</p>



<p>Cybersecurity risks are also present, albeit less pressing than in the traditional financing world. Hackers can target crypto wallets or platforms and exploit system vulnerabilities or a user’s lack of knowledge in protecting their assets and information.</p>



<p>The technology behind projects can also be risky, since not all cryptocurrencies are backed by teams whose experience can be proven. Without a solid foundation or competent teams, a crypto project can be vulnerable to disruptive technology, which can significantly increase the risk of failure or loss of investment.</p>



<h2 class="wp-block-heading">Watch out for trends</h2>



<p>Crypto portfolio allocation can change in the future, with trends like Web3 integration enabling tokens for decentralized applications to operate. DeFi expansion is also expected to gain traction in the future, allowing investors to lend, borrow, and earn yields from DeFi. Institutional involvement, on the other hand, will enable institutional investors to utilize digital currencies, driving progress in the cryptocurrency world. These, along with NFT and metaverse tokens, will introduce new opportunities in the crypto space.</p>



<h2 class="wp-block-heading">Final considerations</h2>



<p>Portfolio diversification in crypto may seem difficult, but it is efficient as long as it’s done based on each person’s risk tolerance and goals. Spreading investments across multiple industries and use cases, reallocating assets, and managing the risks of volatility help build a long-term portfolio that can withstand any market challenges.</p>

How to allocate assets efficiently in a crypto portfolio diversification strategy
