In this article, I’ll talk about the best cryptocurrency to invest in when building your portfolio, the way to construct a portfolio and where to hold it. Whether you are looking at the top cryptocurrencies as a longterm investment or just want to know about the safest cryptocurrencies, this beginners guide will get you started.
I’ve been trading digital currencies for the better part of five years. Over this time, I’ve seen a range of new crypto coins come to market, and now, in the present day, there are somewhere close to 1700.
If you're putting together a portfolio to invest in cryptocurrencies, it’s a good idea to look at it the same way you would look at the stock market.
There are some sectors within a country’s stock market, such as materials, telco’s, financials etc. As a result, it is important to have a balanced portfolio.
Similarly, there are clusters of coins and currencies that serve different purposes.
Let's take a look at what I call the top 3 types of coins you can invest in.
For example, there are the gateways coins. These coins, such as Bitcoin BTC, Litecoin LTC, or Bitcoin Cash BCH, are often used to help you to get into the digital currency space.
These coins are the holders of value and fundamentally built for transactional purposes. They’re like money.
Next, you have the other sets of coins that represent the platforms where the functionality of the blockchain is accessed.
Let’s call them platform coins, such as Ethereum, which forms the basis for many coins within this sector. Lots of people have been and are currently investing in Ethereum as they build their portfolio of platform coins.
Then, you have the Initial Coin Offerings (ICO’s) and the coins themselves. Let’s call this sector the functional coins.
Back to the stock market analogy, an ICO is like an Initial Public Offering (IPO), and the coins are like the individual stocks; the workhorses, the ideas, the functional part of the blockchain.
For many, these represent a growing portion of their cryptocurrency investment.
Please be aware that the market cap of many of these lesser-known ICOs is extremely small.
Some examples of these include coins like Presearch (PRE), which is a blockchain driven search engine. Or VeChain (VEN), which is a product identification management solution used to record the date of things like food and wine.
These are functional coins.
So, when looking to construct a portfolio of digital currencies and coins, we can allocate a percentage of capital to each of these sectors:
Within each of these categories, it is helpful to look at how these coins and their underlying technologies are solving problems in the world.
I like to draw the distinction that identifies whether the coin is bringing competitive pressure or a disruptive solution to market.
By competitive, I mean by using the blockchain to tackle problems that are already being solved by existing business structures.
For example, Presearch is a search engine. It is bringing competitive pressure to an existing industry. It’s a blockchain driven decentralised search engines while Google is centralised, meaning a small group of people control it.
By disruptive, I mean using the blockchain to completely change the way an entire industry operates.
For example, VeChain is using the blockchain to record use-by dates.
When produce is grown, what happens to that produce between being harvested and arriving on the supermarket shelf?
That's going to change the way that industry works in terms of freshness and contamination.
If we can come back to the analogy of the investment strategies of the stock market when you look at how most indexes are constructed, they’re formed on the basis of market capitalizations.
If you've got a stock portfolio, you're going to have the large-cap stocks like the large banks, big tech, the large mining companies, and the large retailers taking up a large portion of your portfolio.
The same applies to putting together a portfolio in the cryptocurrency markets.
Starting with gateway coins, the large capitalisation (cap) coins such as Bitcoin through to Bitcoin cash and Litecoin would make up the lion’s share of this part of your portfolio.
From here you would add you platform coins, again from a market cap perspective, such as Ethereum down to EOS, Cardano and NEO.
Finally, you would look at the functional coins.
Within this part of your portfolio, it is harder to identify potential winners, so it makes sense to allocate a smaller amount of capital to this sector - perhaps 7 to10% of your portfolio.
Placing a small portion in the more speculative side of the crypto market is a great way to learn how to invest in a risk-averse fashion.
Decisions on which coins to buy in this sector comes down to good research.
Focus on things that you are interested in and areas of business you understand or can relate to. If smart contracting is something which appeals to you and you know it well, then focus on that area.
If you're interested in a certain area of business, then look for coins that relate to that.
For example, it could be coins that provide credit card capabilities or coins that provide blockchain for rental properties or real estate.
As you can appreciate, there is a lot of money in sectors like Real Estate, so you will find a number of innovative coins to consider in your portfolio.
There are hundreds of interesting opportunities for the application of blockchain technology and businesses with coins to invest in.
Having traded all types of markets over 30 years, sharp spikes in volatility is something I’m quite used to.
In my experience, it's always a good idea to leave a portion of your investment in the market in case you get these crazy spikes and volatility; then you can sell out some of your holdings.
By doing this, you can sometimes bring the underlying cost of the residual amount of coins that you keep to zero.
For example, if I bought 10,000 EOS at $0.50 and sold 5,000 of my holdings when it traded at $1.00, the average cost of my remaining 5,000 EOS is $0.00.
Then I can hold my remaining balance for as long as the market remains in an uptrend without having to worry about losing capital.
As we’ve seen over the last 6-12 months, when a functional coin becomes popular, it can have moves in percentage terms in the thousands quite quickly, so it’s always good to take some profit in the marketplace to take advantage of that volatility.
For those who like to day trade instead of invest in bitcoins for the long-term, having a capital preservation and profit taking strategy is powerful.
There's a number of sites that will assess them for you. You don't have to watch the market day in and day out. Standard & Poor's or Moody’s are useful sites, they assess coins based on a particular methodology and set of criteria.
There's also a lot of coverage on YouTube. There are some very good crypto analysts on YouTube analysing Bitcoin and Ethereum, Ripple XRP and more.
As you can appreciate, it is just their opinion of a coin. We've put together a list of popular YouTube analysts at the bottom of this page.
The larger coins, especially over the last 9 to 10 months, have stabilised. Bitcoin will drift roughly between 33% and 40% of the total value of the complete digital currency market, so it’s becoming more stable.
The ones you want to keep an eye on are the smaller coins. They're just so volatile that if you do get an opportunity to take a little bit of money off the table, it's probably a good idea to do so.
You can either do that by leaving orders in your brokers, in your trading platforms or have an alert system whereby if it moves, you can capture some profits.
I keep an eye on coinmarketcap.com as a guide to what’s moving. If your coin starts to move, then you're going to need to pay extra attention to it.
For a broader portfolio rebalance, look to bring your sector weightings back to your target perhaps every six months, except for the smaller coins.
Keep a closer eye on the smaller coins as they can have short-lived spikes in value which can quickly distort the balance in your portfolio.
You need to know how to store cryptocurrencies for your own financial well being. As the value of cryptocurrencies fluctuates, you may find at different times that your total holdings have risen considerably.
For the larger coins like Bitcoin (the largest cryptocurrency), Ethereum ETH, Bitcoin Cash and Litecoin, it's probably best to keep those in a secure software or hardware wallet if you are not trading them aggressively.
It’s safer in a wallet than housing them on an exchange. The smaller coins I tend to keep in one or two exchanges.
They'll revalue it in real time so you can always keep an eye on it in your exchange. That's what I tend to do with the smaller coins.
I see the price of Bitcoin stabilising. It had such a wild run from May 2017 to December of 2017. It was incredible.
Bitcoin ran to $20,000.
It wouldn't surprise me if we traded for another 12 months between $6,500 and $15,500.
Don't forget, we've got the large future exchanges involved now. The liquidity provided to the market by these exchanges has taken a lot of the volatility out of the market, and it will probably continue to do so for a while.
In a range, basically 6.5 to 14.5, maybe a top of15.5 thousand, but that reduction of volatility is probably a good thing for these markets over the long term. As you can see in the Bitcoin chart below, the average daily price movement in Bitcoin has been in excess of $2,000 per day and as of May 2018, it is moving around $450 per day.
It will likely cause more people to use these currencies for transactional purposes over the internet rather than just for speculation.
The more people that get involved, the brighter the future for digital currencies in general.
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Hopefully, you now have a solid portfolio construction plan on how to include the various cryptos to invest in.
There is no single best cryptocurrency to invest in, just like there is no best stock to invest in. Building a portfolio of cryptos, covering the gateway, platform and functional coins is a simple strategy to consider.
Most people involved in the cryptocurrency space who aren’t motivated purely by monetary gain will likely find themselves at some point saying something like this: “One thing I really like about cryptocurrency is that it’s decentralised, and that the currency isn’t owned or controlled by a bank or state.”
With all that in mind, this article will teach you to understand the key differences, successes, and failings of both centralised and decentralised crypto exchanges.
What is a Bitcoin Gift Card?
A Bitcoin Gift Card is the perfect way for the newcomer to get their first Bitcoin. It comes with a paper wallet and simple instructions to set up a software wallet so that you can transact with Bitcoin over the internet. Bitcoin Gift Cards are available in AU$25, $50, $100 and $500 denominations.
Who should buy a Bitcoin Gift Card?
Anyone new to Bitcoin will find no easier way to get their first Bitcoin.
They can be gifted by an existing cryptocurrency enthusiast, or bought by anyone wanting to get involved for the first time themselves.
How can I pay for my Bitcoin Gift Card?
You can pay with either cryptocurrency through our coinpayments.net payment gateway, or you can use Australian Dollars through our POLI Pay facility.
Can I use a Bitcoin Gift Card to top up an existing software wallet?
Yes. When you receive your additional Bitcoin Gift Card, you can simply import the "Secret" wallet identifier from your Bitcoin Gift Card into your existing software wallet. This will move your Bitcoin from your Bitcoin Gift Card into your existing software wallet.
What does my Bitcoin Gift Card include?
Your Bitcoin Deposit, wallet and key generation and network transfer.
How long does it take to receive my Bitcoin Gift Card?
Going through to checkout takes about 2 minutes. You won't find an easier process anywhere. Once you've placed your order, it can take between 10 and 60 minutes to receive your Bitcoin Gift Card depending on the speed of the Bitcoin network at time of purchase.
We have partnered with GiftPay, an aggregator of online deliverable eGift Cards in Australia.
Through our agreement with GiftPay, you are able to purchase a Flexi eGift Card from us, redeemable at a broad range of retailers in Australia.
Watch the Video to see how it works
What is a Flexi eGift Card?
A Flexi eGift Card is an electronic gift card that lets you choose where you'd like to shop! In the past if you were given a gift card for a particular shop but didn't want to buy anything from that shop, you were stuck. But now with a Flexi eGift Card, you get to choose at which shop you spend your gift.
What's more, you may be able to split your Flexi eGift Card and spend it at different shops! For example, if you have a $30 Flexi eGift Card, you could choose to split it up into a $20 Myer eGift Card and a $10 iTunes eGift Card.
Where can I spend it?
You can spend your eGift Card at a broad range of Australian retailers. For a full list of our retailers, click here. (page showing full list of retailer logos)
How do I redeem it?
Your Flexi eGift Card will be emailed to you. Click the link in the email to open your Flexi eGift Card.
Then convert your Flexi eGift Card into any combination of gift cards or vouchers up to the total available balance. How you redeem your chosen gift card depends on the card or voucher chosen.
What Bills can I pay?
You can pay any bill that has the BPAY logo and Biller Code including credit cards.
Are there any payment limits?
Yes. You can pay a maximum of $1000 per transaction based on regulatory limits. You can however break up a bill into multiple $1000 tranches and enter the same biller and customer reference code.
How does the transaction work?
When you enter the amount you wish to pay, the BPAY biller code and your bill’s customer reference number, you will click through to our checkout.
At checkout, you will be asked to leave your details, which enables us to satisfy our legal requirements under the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2017. This sounds ominous, but takes about 2 minutes.
When you proceed to payment, you will be shown the digital currency amount payable and the wallet address to send your digital currency to.
Once you have sent your digital currency to our payment gateway wallet, you will receive an email notifying you that your payment has been received. We then convert your digital currency to AUD and pay your BPAY bill on your behalf.
Are there any fees?
Yes. At checkout you will notice our 3% fee added to your bill amount. This is to help us manage the currency risk of a volatile digital currency market when converting to AUD for us to pay your bill. We use a third party payment gateway to enable the digital currency transaction. Our considerations when choosing a gateway was security, pricing (spread) and speed. You’ll note when at checkout (before proceeding to payment) that the price you receive on your digital currency is very competitive. Other digital currency BPAY facilitators charge up to 6% per transaction on the currency alone, which in our view is akin to highway robbery.
[Free PDF Download] 5 Costly Mistakes When Transacting in Crypto Cheat Sheet
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