The year 2021 produced market results that most investors wish for. An environment of uncertainty created by the pandemic, along with increased online trends, saw biopharma and stay-at-home businesses such as delivery companies, work-from-home stocks such as Zoom, and home entertainment stocks such as Netflix thrive. Even tech stock sell-offs presented opportunities for investors to buy the dips.
Energy crises, supply chain disruptions, and logistical disturbances, as well as an environment of increasing inflation, paved the way for uncorrelated assets like cryptos to thrive.
Solana was by far the largest winner of 2021 from the crypto class, with gains of almost 9649 percent, followed by Ethereum, which climbed 265 percent thanks to its mass utility for DeFi and other programs. Bitcoin had a rough year, but it still managed to earn more than 65 percent in 2021.
How should you manage your cryptocurrency portfolio with so much uncertainty heading into 2022?
Here are our top five suggestions.
Risk Assessment
Many cryptocurrency experts believe that you should only commit up to 5% of your portfolio to cryptocurrencies. As we all know, they are volatile investments that can fluctuate by an astounding 10% or more in a single day.
Look for usefulness
While Bitcoin is the king of speculative assets, it began as a mechanism of global monetary exchange. It did not work out that way because of its volatile character, which makes it unsuitable as a payment method, but it does provide opportunities for investors and day traders. If 2021 taught us anything, it’s that the true crypto winners are those with meaningful utility and real-world application. Consider Ethereum and Solana as examples. When investing in cryptocurrencies, consider the projects or systems that underpin them. What kind of utility do they have? How many projects do they host on their networks? How many users do they have? This is a solid sign of a future winner. Meme cryptos are adorable, but do they have any real-world applications? Most likely not.
Pay attention to well-known investors
The TikTok investment influencer rose to prominence in 2021. With many novice traders unsure of how to invest in cryptocurrencies, they followed the advice of Instagram and TikTok celebrities. The terrible side of this narrative is that these influencers lack established track records of trading success, and as the phrase goes, “those who can do, those who can’t teach.” Instead, concentrate on imitating real traders. You can do so through social trading sites such as NAGA and eToro.
NAGA is a publicly-traded corporation, and all of the trade leaders are very open about their trading successes. You can check how their portfolios are performing and the level of returns they are bringing to their copiers. Copy-trading allows you to repeat their trades automatically, and the best thing is that you don’t have to be a trading expert to do it. It enables the trade leaders to conduct all of the research and strategy on your behalf while you benefit from their experience.
- Diversification
Diversification is the process of exposing your portfolio to as many various types of assets, markets, industries, and countries as possible, so that if one fails, the others may prosper. In the context of cryptocurrencies, this implies don’t just buy Bitcoin; instead, diversify your capital over a variety of cryptocurrencies. Gain exposure to cryptocurrencies by purchasing them, trading them, or investing in stocks tied to them, such as mining firms and crypto platforms. Diversification is the key to your portfolio’s ability to weather any storm.
- Dividends and other forms of passive income
Unlike some equities, cryptos do not pay monthly dividends, but they allow you to stake them for passive yield. Investigate staking, loaning, and lending protocols in 2022 to make your idle tokens work hard for you.
In conclusion
We only know that the markets will have a turbulent year in 2022. On the other hand, this type of setting causes volatility, which, when appropriately exploited, provides an opportunity for investors and traders. More money is being poured into the crypto sector than ever before, thus this asset class is primed to have another exciting year. The key to managing your cryptocurrency portfolio is to maintain your capital as long as possible while extending rewards and limiting risk. If you follow the advice above, you will have a solid basis for the coming year.
