How To Find A Needle In A Crypto Haystack

How To Find A Needle In A Crypto Haystack
Jonathan Hobbs

over 1 year ago4 mins

  • Don’t wait for the next crypto bull market to run off without you. Use this bear market to build your ideal portfolio.

  • Rather than try to pick a handful of single winners, spread your crypto bets by accumulating coins and tokens from all the major sectors.

  • Choose how to allocate your investment across digital assets, depending on your risk tolerance. For the “safer” option, put more in bitcoin and ether than the rest.

Don’t wait for the next crypto bull market to run off without you. Use this bear market to build your ideal portfolio.

Rather than try to pick a handful of single winners, spread your crypto bets by accumulating coins and tokens from all the major sectors.

Choose how to allocate your investment across digital assets, depending on your risk tolerance. For the “safer” option, put more in bitcoin and ether than the rest.

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If anyone ever tells you they know which coins or tokens will make the best crypto investments, don’t believe a word of it: the truth is nobody knows. But what you can do is build a diversified portfolio with bitcoin, ether, and a range of the leading coins and tokens across some key parts of the crypto landscape. This way, you’ll stand a better chance of finding the diamonds in the rough.

How do you get started?

Depending on your risk tolerance, you’re going to want the largest chunk of your portfolio in bitcoin, and the second largest in ether. These have much larger market sizes than the rest and are usually more stable. So they could form the core of your portfolio, surrounded by smaller “satellite” positions from these eight places…

1. Smart contract blockchains (other than Ethereum)

Besides Ethereum, there are lots of other smart contract blockchains to choose from, each with its own advantages and disadvantages. You’ll want to hold a wide enough spread to ensure you 1) land a few big winners, and 2) don’t fall victim to the next Terra Luna.

Here are some of the better known plays: Solana (SOL), Cardano (ADA), Polkadot (DOT), Elrond (EGLD), Polygon (Matic), Avalanche (AVAX), Fantom (FTM), Waves (WAVES), Tron (TRX), Algorand (ALGO), and NEAR Protocol (NEAR). It’s worth spending some time researching these to find five to 10 for your allocation to this sector.

2. DeFi

By buying into smart contract blockchains, you’ll already have skin in the DeFi game – since all DeFi projects are built on those chains. But you can also buy the tokens of the DeFi platforms themselves. Here, you’ll want to spread your bets among a few different subsectors within DeFi.

For Decentralized Exchanges (DEXs), look into Curve (CRV), Uniswap (UNI), SushiSwap (SUSHI), and Thorchain (RUNE). And for Lending and borrowing, check out MakerDAO (MKR), Compound (COMP), and Aave (AAVE). For added adventure, explore some derivatives protocols like dydx (DYDX) and Synthetix (SNX). But be aware, these might carry more risk.

3. Oracles

Blockchain smart contracts often need reliable data from the outside world. DeFi smart contracts, for example, might connect to a pricing feed from a centralized exchange. That’s where oracle protocols come in – bridging the information gap between the blockchain (on-chain) and the outside world (off-chain).

When it comes to Oracle protocols, Chainlink (LINK) is the clear market leader. And its LINK token has performed well in past bear markets.

4. Centralized exchange tokens

Centralized exchanges are still the main stomping ground for most crypto traders. And some have grown into formidable business operations. But unlike with Coinbase (COIN), you can’t buy shares in them. So the next best thing is to buy their exchange tokens.

Depending on the exchange, these tokens offer certain incentives when using the platform – like lower trading fees when trading between the token and other assets. Exchanges Binance, FTX, and Huobi usually bring in the most trading volume. Their tokens are Binance Coin (BNB), FTX Token (FTT), and Huobi Token (HT).

5. Gaming and Metaverse

Blockchain games already process more smart contract transactions than any other sector. While the average size of those transactions is still miniscule, the industry could level up as blockchain infiltrates the regular gaming industry.

Look into the more experienced gaming and metaverse players, like The Sandbox (SAND), Decentraland (MANA), Alien Worlds (TLM), and Splinterlands (SPS). These also house in-game NFTs if you’re into that sort of thing.

6. Privacy coins

Privacy coins like Monero (XMR) and Zcash (ZEC) can be sent over their blockchains with complete anonymity. They do this by encrypting transactions so they can’t be tracked – unlike bitcoin, for example, where every transaction is publicly displayed on an open ledger.

And while privacy coins might sound like a dream come true for criminals, they’re gaining more mainstream credibility, particularly among the well-to-do. Privacy is a form of security, after all.

7. Supply Chain

During the pandemic, we saw how complex global supply chains could break down. Well, those chains involve a lot of data exchange, and they’re also highly compartmentalized. So putting supply chain data on a secure and open blockchain makes a lot of sense. As far as supply chain projects go, VeChain (VET) has gained the most traction.

8. Decentralized storage projects

Dropbox, Google Drive and iCloud are all convenient ways to store important information in the cloud. But “in the cloud” just means that your information is stored in various data warehouses belonging to those companies. And while those warehouses are backed up and secure, they still have central points of potential failure. In the future, decentralized data storage platforms should become a lot more widespread. Look into Arweave (AR), which describes itself as "a collectively owned hard drive that never forgets."

And what happens next?

Once you've decided which coins and tokens to start accumulating, think about how you want to split your portfolio. It’s up to you to decide how much to invest in each of the above areas. And, don’t forget to rebalance your portfolio once in a while to make sure it doesn’t drift too far from your target range. You can learn more about all of that over here.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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