A portfolio Approach for the Long Term Investment in Cryptocurrencies
Lead: A Portfolio suggestion for a long term cryptocurrency investment.
What is a long-term investment?
Before we proceed to talk about long-term investments, we should probably be clear on what “long-term” means. There are no hard and fast rules because investments and profits are totally dependent on the real-time situations. A long-term investment is an investment that has a higher probability of maximizing your returns over a 10 year period as compared to competing alternatives. It is basically the average of the profits and losses that the currency experiences in short-terms.
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Long-term Cryptocurrency portfolio would have built capital over a long period of time. There are many advantages of long-term investments. Some of them are summarized below.
- Statistical History proves it:
Historical Data of equity markets generally tend to trend upwards over a period of time, so with this in mind, long-term investing does have its merits.
- Lower operational fees:
A long-term investor does not trade every day; therefore, they do not have to worry about trading fees. Hence with a long-term investment strategy, all the investor has to do is select a few cryptocurrencies, and then wait.
- Less Risky:
The market does have a tendency of falling and recovering. Moving your investment in and out of the market could mean that you miss days in which significant gains are made. You don’t have to worry about this with a long-term investment.
For a long-term crypto investment, a number of criteria must be available, so as to entitle a particular Crypto investment as a long-term. We may extract the criteria from the equity markets as they are also intended for steady progress over a long period of time. Some of the criteria are listed below
- Market Share.
Market Share can be defined as the proportion of market capitalization that cryptocurrency posses. A large market share typically indicates dominance over the crypto market and hence a better stability in the market.
- Utility value.
When determining if a cryptocurrency will be in a state to sustain few years. One needs to ask and find answers to questions like- Is the cryptocurrency having a core impact on users? Does it have a users’ market? Why does this cryptocurrency even exist? These questions are important because they are the most useful cryptocurrencies that are likely to be widely adopted by the masses.
- Transaction volume.
In order to find out whether a cryptocurrency is actually being used or not, one can take a look at its transaction volume. This indicator also speaks about the long-term usage of the currency. Higher the transaction volume, greater is the probability of it thriving in the market and delivering huge returns and vice-versa.
- Market News.
Even with a trivial FUD in the news, cryptocurrency market starts to swing rapidly. Market news does affect the price of one’s cryptocurrency and would have a contemplative effect on the portfolio, so it is important that we should be ready to react. Overall, one has to stay up-to-date with market news involving cryptocurrencies so that one can make informed investment decisions.
Considering all these vital factors along with the investors time duration in mind. One can draw a long-term Portfolio in the following manner.
- 50 % of Bitcoin and its forks.
- 25% in Litecoins and Ethereum.
- 15 % in anonymous coins like Dogecoins, Monero and maybe Zcash.
- 10 % the investor can choose to invest in new interesting and top-rated ICOs.
Note that the above-mentioned portfolio is just a suggestion and must not be considered as the absolute one. Investing in cryptocurrency is undoubtedly speculative if investments are done hastily with just the craze of Bitcoin and without thinking about the consequences. One must always consult an expert in the field, before undertaking any form of investments, must invest only the amount of money which they are ready to risk. We must also take into account, the increasing vulnerability of the currency to the ever-increasing number of hacks.