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A well-balanced portfolio includes different types of crypto with various risk levels and use cases. The latter include payments, DeFi, gaming, Metaverse, governance tokens, security tokens, and privacy coins. Consider mixing large-cap, mid-cap, and small-cap cryptos to spread risk and boost the potential for balanced growth.

One should also rebalance the holdings as necessary according to the market dynamics. This may be done manually, but the most effective approach is automated.

Stablecoins are designed to retain a stable price pegged to fiat — for instance, USDT (Tether) and USDC (USD Coin) trade at roughly $1. They are not designed to grow in value but provide stability during peak volatility. Thus, they can work as a hedge.

To minimize risk, beginner portfolios are typically limited to BTC or BTC and ETH. Intermediate ones add altcoins from the market cap top 25, with medium risk. Advanced portfolios encompass everything in the intermediate category plus the riskiest assets, such as meme coins and other tokens beyond the top 25, along with NFTs.

Given the market’s volatility, reliable monitoring tools can spell the difference between profit and loss. Portfolio trackers simplify investment with a centralized view, reflecting the total investment value and tracking performance over time. Advanced users analyze trends, set alerts for specific price moves, and make strategic decisions based on real-time data.

Trackers merely consolidate data for a comprehensive view. {Clapp} empowers you to access and manage your holdings in real-time without external exchange accounts or wallets.

Portfolio evaluation is crucial to ensure your assets perform at their best. Typical approaches include assessing the dynamics of the total portfolio value and that of individual investments. Tracking tools compare performance with a benchmark and calculate the Sharpe ratio, the Sortino ratio, and other indicators. {Clapp} dissects the performance of your asset composition across a broad range of indicators.

Long-term strategies, such as HODLing or dollar-cost-averaging, are focused on growth over months or years. Short-term strategies involve buying and selling assets over a short period, often days or weeks, to capitalize on price fluctuations. The choice depends on your goals, risk tolerance, and time horizon.

Short-term crypto trading may be profitable, but also highly demanding due to the market’s volatile nature. Success requires accurate predictions, correct timing, and careful risk management, similar to navigating turbulent waters.

Long-term strategies, in comparison, are akin to planting seeds for future growth — they offer potential returns to the patient, regardless of short-term fluctuations.

Define your risk tolerance, which is your ability and readiness to tolerate volatility and potential losses based on personality, financial situation, and investment knowledge. High-risk investments offer higher returns and higher losses.

Diversify the portfolio by asset class and sector. Consider including stablecoins to preserve capital and maintain liquidity during highly volatile periods.

Portfolio holders should also rebalance their composition regularly to keep it aligned with the risk tolerance and investment goals. Advanced users may also hedge with derivatives like futures or options.

Portfolio rebalancing is like adjusting the ingredients in a recipe to maintain the desired taste. It includes selling some of the assets in your portfolio to buy others and meet the desired allocation goals. One may reshuffle their assets manually or use automatic tools.

The second scenario includes scheduled rebalancing and threshold-based rebalancing. In the latter case, assets are bought or sold once there is a certain deviation from the desired allocation. Percentage rebalancing tools reshuffle assets based on absolute changes in their percentage shares.

Professional traders monitor a wide range of indicators. If you are just starting in crypto, get familiar with the most popular indicators in five categories.

• Trend indicators show in which direction the market is moving.
• Mean reversion measures how far prices can swing before a retracement.
• Relative strengths indicators gauge oscillations in buying and selling pressure.
• Momentum indicators reflect the speed of price changes.
• Volume indicators quantify the dominance of bulls or bears.

Taxpayers participating in crypto transactions face varied considerations around the world depending on local regulations. For instance, in the United States, the IRS treats crypto as property, subject to capital gains and income tax, with the rates for short-term and long-term gains differing dramatically. Research your country’s regulations to stay compliant.

Replicating the strategies of expert traders brings obvious benefits, but do not rely solely on their expertise. It is crucial to develop your own skills and choose traders wisely. Copy trading can help you avoid common and beginner mistakes, but profit is not guaranteed, and losses are also possible.