How Much of Your Portfolio Should You Allocate to Bitcoin?

When it comes to cryptocurrency investing, here’s the best I know it’s never, ever a good idea to put all your eggs in one basket because the value of the investments and profit from them aren’t guaranteed. You won’t get back the amount originally invested. Diversification gives your cryptocurrency portfolio a much-needed boost so you can enhance returns and secure long-term success. The balancing process calls for translating your financial circumstances, objectives, and constraints into a bunch of digital assets to attain your goals, so if you have a burning desire to see change in your life, prioritize investments that protect against market volatility.

Bitcoin Brings In 80% Of Results, While Polygon and Dogecoin Fuel the Remaining 20% 

A well-diversified cryptocurrency portfolio is made up of small, mid-and large-cap coins – in other words, different asset types you may choose to pursue. The 80/20 rule, or the Pareto principle, is a good starting point if you’re investing in cryptocurrency for the first time: 80% of your profits will come from large-cap tokens, like Bitcoin, and 20% from mid- and small-cap cryptocurrencies, like Polygon and Dogecoin. The rule of thumb isn’t fail-safe, but it’s better than dabbing into the cryptocurrency market. Having a strategic focus allows you to better understand the key players of the cryptocurrency ecosystem so you can make informed choices, regardless of your degree of “moneyness”. 

Bitcoin Is Worth More Than $10 Billion

You can use price to gauge a token’s value, but the market cap tells you the whole story; it shows the growth potential of the digital asset and whether it’s safe to buy compared to others. Bitcoin is the biggest cryptocurrency by market cap – $1,318.26. Attention must be paid to the fact that the data is updated every few minutes, and the value of If you take a closer look at the Bitcoin price chart, you’ll see it grows with time, having attracted the attention of retail and institutional investors. Any person can now invest in Bitcoin through the new ETFs that provide leverage to the price of the underlying asset without having to learn how it works.

Polygon And Dogecoin Have Shown Potential with Recent Spikes

Polygon, which runs alongside the Ethereum blockchain, witnessed an impressive uptick in activity over the past couple of months, providing much faster transactions at reduced costs. Sure, you must pay gas fees on the Polygon blockchain, but it’s much less than paying transaction costs for the Ethereum blockchain, which are high due to network congestion during periods of high demand. In a bullish scenario where Polygon keeps gaining traction and adoption, it could experience significant growth. Dogecoin’s price makes it a popular trading asset. For now, the meme coin’s momentum hinges on the general pace in the cryptocurrency market, with Bitcoin as the primary determinant.

Looking To Invest in The Best Large-Cap Cryptocurrency for Upside Potential? Try Bitcoin

Bitcoin has consistently remained the largest cryptocurrency by market cap, exceeding billions of dollars. It was the first digital currency ever introduced to the public, meant to be used as a form of payment outside of legal tender, but it’s treated as property rather than currency. Surprisingly, Bitcoin is more stable than shares in tech giants like Amazon and Meta, and it’s possible for someone with no experience to buy and sell without much difficulty. Bitcoin asserts dominance in the cryptocurrency market, so you can often see a ripple effect on the prices of other coins.

Large-cap tokens like Bitcoin are considered less volatile than small-cap ones owing to the higher trading volume and the more considerable number of market participants they draw in. If you’re less risk-averse, you’ll want to invest in a less anxiety-producing asset that doesn’t hit highs and lows quickly. Even if Bitcoin’s price fluctuates, it provides the opportunity to make money, so buy when the price is very low, and wait for cumulative growth down the road. Predicting when it’s exhausting its current bullish momentum is challenging as Bitcoin isn’t linked to profit generation or company performance. Don’t believe overly optimistic predictions.

Bitcoin has a well-established ecosystem with a wide range of use cases, such as:

• P2P payments: Users are empowered with low fees and reliable confirmations. In the event of an accidental transfer, your best option is to reach out to the recipient and try to get your coins back.
• Purchasing goods and services: More and more businesses are incorporating payment gateways with Bitcoin. Ex., travel agencies, online retailers, hotels, fashion houses, and video game retailers, to name a few.
• Store of value: Bitcoin is a long-term hedge against inflation. The production of tokens is capped at 21 million to retain value, Bitcoin discourages nodes from altering the records, and you can trade the asset at roughly the same price worldwide.
• NFTs: The Ordinals protocol allows the creation of NFTs on the Bitcoin blockchain. To inscribe an Ordinal, you must send a transaction to a Taproot address and include text or image in the data section.

High-performing cryptocurrencies like Bitcoin attract institutional investors who see value in diversifying their holdings and reducing their overall portfolio risk. Many clients have expressed interest in Bitcoin (and other cryptocurrencies). There are indirect ways institutions can invest, such as spot Bitcoin ETFs that track the current price of the token, eliminating the need to purchase and manage Bitcoin, which can be attractive from a security, regulatory, and technical standpoint. 

Wrapping It Up

A well-balanced cryptocurrency portfolio makes diversity a priority, meaning it’s built with various investments with different patterns of risks and returns. You can choose from many types of coins, including but not limited to payment tokens, security tokens, utility tokens, gaming tokens, and non-fungible tokens. Because Bitcoin is a high-return potential asset, it’s worth adding it to your portfolio. 80% of your portfolio should be in the largest, most established cryptocurrency whilst leaving 20% of your investments in stabler coins, like Polygon or Dogecoin. Don’t risk everything on the success of one venture.

In sum, Bitcoin continues to outperform every major asset class, and from a portfolio perspective, there are benefits from combining Bitcoin with mid and small-cap cryptocurrencies. There’s no certainty, though, as the past is no guarantee of the future.

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