SiFi’s Guide to Building a Successful Portfolio in the Crypto Space

Building a portfolio is hard! We have all been tempted at some point to FOMO our entire portfolio into a dog or cat coin on an unknown chain because the “hype is real”. This kind of feeling is a proper tasting recipe for disaster because it never ends well. So in this article, we will share actionable, data-driven steps to build a well-balanced, successful crypto portfolio.

Before we continue, however, let us describe the general form in which coins exist in the crypto market. This will help us later when we learn how to prioritize assets and balance out our portfolios.

1. Governance coins: These coins have utility in the fact that they give you some governing power over the platform which they represent. For instance, COMP, the governance token of the Compound Finance ecosystem, allows holders to create and vote on proposals that will affect the future of the ecosystem and app in general.
2. Stablecoins: A stablecoin is a token that attempts to track an underlying asset such as a fiat currency or precious metal. USDT, for example, pegs the U.S. dollar with reserves set at a 1:1 ratio. USDC by Circle and Coinbase uses the same system as well. While stablecoins don’t provide large returns (or any returns for that matter) on their own, they are extremely useful and they provide stability and are essential parts of any crypto portfolio as they are required to make purchases when the market gives discounts.
3. Meme tokens: These coins exist as jokes and fun-makers. They have no real utility and exist for quick pumps and dumps. It is usually a good rule-of-thumb to avoid these tokens as much as possible because of their unpredictable and highly fluctuating nature.
4. Utility tokens: A utility token acts as the key to a service or product. For example, BNB, MATIC and ETH are all utility tokens. Among other things, they can be used to pay for transaction fees when interacting with decentralized applications (DApps) or their native blockchain networks.

Now that we know the types of coins that go into our wallets, let’s look at the proper balance.

Steps to Building a Well-balanced, Successful Crypto Portfolio

1. Balance is important: You should not have too many memecoins or too many stablecoins in your portfolio. You should instead have a balanced amount of everything to ensure that your portfolio brings a uniform ROI.
2. Split your portfolio between very high, high, medium, very low and low-risk investments to achieve a good level of balance. A portfolio containing a large portion of high-risk investments is definitely not balanced, but neither is one with only dog coins or stablecoins. Your risk profile will be integral in determining what is best for you, so ensure to look inwards. If you love the thrill of the markets, then you should have a larger amount of “risk-on” assets, but if you like steady profits, then lower risk should be your go-to.
3. Allocate new capital in a reasonable way to avoid upsetting your portfolio’s balance. For instance, if you’ve made big gains recently from a coin that pumped wildly, you should consider moving some of the profits to a stablecoin or fixed yield assets like ETH. This will help protect or compound your earnings.

All in all, it is a very straight-forward process to build a decent portfolio. We hope you learnt something!

About SiFi

SiFi is crypto simplified. It comprises a mobile app that abstracts away the complexities involved with crypto investing and onboarding by giving you baskets picked by professionals to mitigate risk as well as a built-in on-ramp to simplify user onboarding. Get started today at the website linked below.

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