Identifying the best crypto coins for a particular investing style can be a painfully tedious task. The current landscape of the crypto market is incredibly complex. There are over 13,000 tracked coins. While some of them are considered “dead”, over 8,700 of them are active and can be purchased on centralized or decentralized exchanges. According to the UK authorities, there could be over 20,000 coins that can, in theory, be used as currency at a moment’s notice.
Figuring out what cryptocurrency is the best to invest in is already a tough task. Trying to select several digital assets that perfectly fit into your portfolio tuned to your preferences and risk tolerance is an even tougher challenge even if you can brag about having experience in the crypto ecosystem.
One of the main separators of general investment strategies is the investment horizon or the period during which an investor plans to hold on to their positions. You may join the army of Bitcoin enthusiasts and “hodl” until the end of time. Alternatively, you may be interested in making a quick buck. The “long-term vs short-term investing” battle is a neverending cycle. Capital holders often try to use both, but the majority still leans heavily in one direction or the other.
While the author of the article is in no position to recklessly throw around financial advice, we can still discuss some ways to analyze cryptocurrencies from the perspectives of long-term and short-term investors.
Investors adhere to all sorts of rules when it comes to diversification. Some believe that splitting the investable capital at 1/9, with 10% dedicated to the stock market and other volatile assets and 90% — to fixed-income instruments and real estate, is the best option. Others lean heavier to more aggressive distributions (3/7 or even 50/50 are also used commonly).
The general rule of thumb is that you must focus on fixed-income and real estate or other highly stable assets while dedicating a much smaller share of capital to riskier assets like stocks, options, low-quality bonds, and, of course, digital currencies.
The same split is often recommended within certain asset classes. For instance, it is quite common to hear that an investor should invest the bulk of their capital into Bitcoin as a stable, consistently appreciating asset, and only a small fraction into riskier tokens like Solana, Polkadot, Cosmos, and others.
Many short-term strategies are strongly focused on leveraging tools like automated arbitrage, high-frequency trading, yield farming, and other systems that can produce profits reliably yet do not have the same potential for long-term appreciation or performance over distances larger than a year.
In chaotic environments, such as the DeFi ecosystem and the larger cryptocurrency market, one has to rely on technical analysis for trading. It means that many tokens are complete gambles precisely because they cannot be appropriately evaluated due to very short and uneventful market histories and the inability of investors to engage in other analytical approaches.
Since you are largely unarmed when it comes to analyzing the vast majority of digital assets and the speculative nature of the market prevents you from using established tools of fundamental analysis for crypto, using a variety of subjective metrics to identify digital assets that work well for particular portfolio types is hugely important.
Let’s talk about some of the most popular methods of analyzing assets and which types of cryptocurrencies work well for certain types of portfolios and risk styles.
Crypto investors planning to hold on to their assets for the foreseeable future should always consider several factors that determine the longevity of any given cryptocurrency. Below are some of them:
It is also important to remember how technological advancements are influencing investment strategies in cryptocurrency as many instruments fall out of favor due to slow evolution and inability to adapt. Investing in projects with proven track records of reactive development and strong community support is quite important when it comes to searching for long-lasting capital allocation options.
When it comes to risks of long-term and short-term strategies, the latter takes the crown as you have way more factors to analyze at any given moment. However, an argument can be made that all tokens outside of the market-leading pack are equally dangerous. The job of an investor seeking quick returns boils down to finding tokens that fit the following criteria:
DeFi users with realistic expectations do not hope to receive returns on their investments in 100% of cases. Large risk premiums mean that you can recoup losses from several unprofitable investments by making bank on a single investment that pays off greatly. Aggressively diversifying and taking risks is a part of any short-term strategy in the world of crypto.
With the diversity of the crypto ecosystem, the importance of adapting strategies based on market conditions is undeniable. You don’t have to put all your money into Bitcoin hoping that it will X5 or X10 during the next bull run. Instead, you may use a portion of investable capital to focus on promising DeFi investments.
The Rivo platform is an excellent destination for capital holders interested in building a balanced portfolio that perfectly reflects their preferences, risk tolerance, and investment horizons. The selection of strategies features all sorts of options that were picked by experts and diligently researched by teams of specialists who check historical performances, development teams, security features, and more to ensure that you choose the best from the best.
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