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Why does it matter to include as many types of cryptocurrencies as possible?
Cryptocurrencies are unpredictable assets, so throwing all your eggs into one basket, like Bitcoin or Ethereum, is a recipe for disaster. It’s wiser to invest in safer assets like Bitcoin and Ethereum, as well as several riskier alternative coins like Dogecoin, Solana, Chainlink, and other similar ones. This investment strategy enables you to make a profit without stressing yourself out that your portfolio is exposed to huge levels of risk.
Some investors find it easy to dismiss meme coins because they have been described as assets with no real value in their first years of existence. But they have evolved into cryptocurrencies with real-world use cases, and while they still are highly speculative, they have the potential to boost a portfolio’s profitability. In 2025 the idea of learning how to buy Dogecoin and adding meme coins to a long-term investment portfolio no longer sounds absurd. This market cycle something happened in the sector and meme coins have gained the reputation of lucrative assets among investors willing to research how to trade them.
Reasons to build a balanced crypto portfolio
With cryptocurrencies becoming some of the most popular financial assets in the world, this article explores how you should diversify your portfolio with the most volatile category of digital currencies. But before diving into the subject, it’s worth exploring why diversification is paramount for a crypto portfolio, and you should abide by it, regardless of your experience in the sector.
Investing in crypto is similar to investing in other forms of assets, and diversifying your portfolio ensures that you manage the level of risk you expose your finances to and gives you the opportunity to capitalize on market trends. When you have multiple categories of assets in your portfolio, you can rebalance them at any time by selling the overperforming assets and putting the money into undervalued assets that could grow in the future.
The crypto market is highly volatile, and no one can tell for sure what the future holds, but investing in multiple projects allows you to reduce your portfolio’s overall volatility and maintain liquidity.
A well-diversified portfolio will provide you with increased protection during volatile periods. Some cryptocurrencies are less volatile than others, so you can manage your finances better when the market fluctuates. It also enables you to take advantage of growth opportunities because you access different niches of the industry.
How to diversify your portfolio with meme coin
Meme coins can be unpredictable, but with the right approach, they can play a valuable role in portfolio diversification. You use data-driven and risk-managed strategies to maximize potential returns while mitigating risks.
Allocate a small but strategic percentage
A balanced portfolio is essential for long-term success in crypto investing. While meme coins offer high-risk, high-reward potential, they should not dominate your portfolio. A 5-10% allocation to meme coins is a common strategy among experienced traders.
Allocate according to your risk tolerance:
- Low risk: 3-5% in well-established meme coins (e.g., Dogecoin, Shiba Inu).
- Moderate risk: 5-8% in a mix of top meme coins and emerging projects with strong fundamentals.
- High risk: 10%+ with exposure to newer meme coins that have high speculation potential.
Focus on meme coins with strong communities
The success of meme coins is community-driven rather than relying on traditional fundamentals like revenue or blockchain utility. Coins with large, engaged communities have a higher chance of long-term survival and growth.
Here is how to evaluate a meme coin’s community strength:
- Social media engagement: High activity on Twitter, Discord, and Reddit.
- Holder distribution: A growing number of unique wallet addresses indicates widespread adoption.
- Development activity: Regular updates, token burns, or new utility integrations.
Example: Dogecoin’s success is largely attributed to Elon Musk’s influence and Tesla’s acceptance of DOGE for payments, while Shiba Inu’s ecosystem has expanded with Shibarium Layer 2 and ShibaSwap.
Hedge against market movements with different types of meme coins
Instead of going all-in on one meme coin, diversify within the meme coin category to hedge against volatility. Diversifying across these types can reduce downside risk while still providing exposure to potential explosive growth.
1. Blue-chip meme coins: Dogecoin (DOGE), Shiba Inu (SHIB) – Lower volatility, higher liquidity.
2. High-growth meme coins: PEPE, Bonk (BONK), Floki Inu (FLOKI) – Strong community growth but higher risk.
3. Utility-driven meme coins: Some meme coins integrate staking, DeFi features, or NFT marketplaces (e.g., tamadoge).
Time entries based on market trends
Meme coins thrive on market sentiment and retail speculation, so timing is everything. Entering the market at the right time can significantly improve returns and reduce exposure to sudden sell-offs.
Pro Tip: Avoid buying at all-time highs when FOMO is at its peak. Instead, enter during market corrections when strong meme coins are undervalued.
Take profits regularly to lock in gains
Meme coin rallies can be short-lived, and holding too long can erase gains quickly. The key to success is a disciplined profit-taking strategy.
Effective profit-taking strategies
- Initial Investment Recovery: Sell enough after a 2x gain to recover your principal investment.
- Incremental Profit-Taking: Sell 25-30% of holdings at 2x, 5x, and 10x gains to secure profits.
- Reinvestment Strategy: Convert profits into Bitcoin, Ethereum, or stablecoins to preserve gains.
Example: An investor who bought PEPE early in 2023 and took profits at key levels made significant returns, while those who held too long saw price corrections erase much of their gains.
Use meme coins for short-term trading & long-term holds
Different meme coins serve different purposes in a diversified portfolio:
- Short-term trades: Trending meme coins with high volatility can be used for scalping or swing trading.
- Long-term holds: Established meme coins like DOGE and SHIB may provide more stability over time.
A mixed strategy of trading meme coins for quick profits and holding select projects for long-term speculation can balance risk.
Manage risks with stop-loss & portfolio rebalancing
Since meme coins are highly volatile, having a risk-management plan is essential:
- Use Stop-Loss Orders: Setting a stop-loss at 20-30% below entry can prevent large losses.
- Avoid Overexposure: Keep meme coin holdings below 10% of your total crypto portfolio.
- Rebalance Regularly: If meme coins grow significantly, shift some profits to more stable assets.
By following these principles, you can leverage meme coins strategically while keeping your overall portfolio secure.
Final Thoughts
Meme coins offer unique diversification benefits, but proper strategy and risk management are crucial for long-term success. By allocating a small but strategic portion of your portfolio, diversifying among different meme coins, and taking profits at the right time, you can capitalize on meme coin volatility like a pro while protecting your overall investment.
