Building a Long-term Portfolio
Time in the market is more important than timing the market.
If crypto is part of your long-term portfolio of assets, it most probably is one of the 'riskier' asset classes you own (with often the highest potential upside). As a long-term oriented investor in crypto, you are betting on the growth of the crypto market as a whole. Your crypto portfolio most likely reflects this by being spread out amongst multiple blockchain projects. Although portfolio management depends on personal preferences, it is likely you’ll have at least some BTC, ETH and a selection of altcoins.
The ratio amongst your crypto assets should match your risk appetite. Altcoins tend to come with higher uncertainty and higher potential upside than ETH and BTC. This is due to many factors such as their market capitalization, adoption rate, liquidity and underlying technology.
So how is risk appetite reflected in your long-term portfolio?
Portfolio examples
Below you'll find a few examples of long-term crypto portfolios to illustrate different kinds of risk appetite. Depending on your risk appetite and profit ambitions, your crypto portfolio might look something like one of these three examples.
1. Low risk long-term portfolio
This portfolio is fairly conservative. It has a high allocation to Bitcoin and a smaller allocation to Ethereum and other altcoins. While still exposed to some degree of risk, this portfolio aims to balance potential returns with a low level of volatility.
2. Moderate risk long-term portfolio
This portfolio is more spread out, with equal exposure to Bitcoin, Ethereum and altcoins.
3. High risk long-term portfolio
This portfolio is the most 'risky', with the highest allocation to altcoins. By focusing on altcoins, this portfolio seeks to benefit from the growth of the broader cryptocurrency ecosystem.
It's worth noting that the percentages in the example portfolios are arbitrary, but they give you some idea on what a portfolio might look like given the risk appetite of the investor. The percentages obviously might need to be adjusted over time as market conditions change and new information becomes available.
Gathering new information and data to determine relative under- and overvaluation of blockchains is exactly what we focus on. For our own data-driven investment decisions, but also to share with others.
Exposure to the market
Besides aiming to optimize your exposure within the crypto market, there are moments in time when you might want less or no exposure to crypto at all. For example, when you think the market is at a (local) top, you probably want to sell some or all of your digital assets. In case if crypto, this means you'll either convert them to stablecoins like USDC, USDT and TUSD, or to fiat currency like USD or EUR through an exchange.
Stablecoins are a type of cryptocurrency that are designed to maintain a stable value, typically by being pegged to a reserve asset like a fiat currency (e.g. USD, EUR). Stablecoins aim to provide stability and reduce the risk associated with price fluctuations. They offer a way to hold digital assets that can easily be converted back into fiat currency.
Depending on your risk appetite and where you think we are in the crypto market cycle, stablecoins or fiat currency will be a small or large part of your portfolio. Products like Ace BTC can help you with determining how much exposure you might want at a certain point in time.