Hong Kong’s Crypto Regulation Framework: How Hong Kong is Regulating
I want to invest in 5-10 Cryptocurrencies: What are the best options?
For anyone who is new to cryptocurrency and is ready to invest, the most frequently asked question that comes to one’s mind is: which are the crypto coins to invest in 2023?. Investors want to diversify and there is nothing wrong with diversification.
In traditional investment, we are taught to not put all the eggs in one basket. This is true in case of any other asset class. However cryptocurrency has its own way of behaving.
Cryptocurrency generally do not follow traditional way and from my experience diversification does not help. Many new investors who are investing in cryptocurrency for the first time or if it is their first cycle, they only have seen one way movement, i.e. upwards. Hence, even with diversification, the portfolio is up.
But when the market corrects, if you are over diversified, the portfolio will take very less time to go back to the initial position. All the profits will get drained faster than you could possibly think. Hence, it is important to stay limited to a very few crypto coins. We will be discussing more on that, later into the article.
First, let me give you some good reasons to invest in cryptocurrencies. What are they? Let’s find out in the next section.
Reasons for investing in cryptocurrencies
Potential for high returns: Cryptocurrencies have been known to experience sudden price surges, resulting in high returns for investors. For instance, Bitcoin, the first cryptocurrency, saw a surge from around $1,000 in early 2017 to almost $20,000 later that year.
Diversification: Cryptocurrencies offer investors an opportunity to diversify their investment portfolio beyond traditional assets such as stocks and bonds.
Security: Cryptocurrencies use advanced encryption techniques to secure their transactions, making them less prone to hacking and fraud compared to traditional financial systems.
Lower transaction fees: Cryptocurrency transactions are often cheaper compared to traditional financial systems, making them attractive for cross-border transactions.
Disruptive potential: Cryptocurrencies have the potential to disrupt traditional financial systems by offering faster and cheaper transactions, as well as greater financial inclusion for the unbanked population.
Now that we are clear with why we should be investing in cryptocurrencies, in the next section, let us learn about how to research on which coins to invest.
Researching On Cryptocurrencies: How to DYOR?
Before investing in cryptocurrencies, it is important to conduct due diligence and research to make informed decisions. Here are some key aspects to consider before investing in any crytocurrency:
Conducting due diligence before investing:
- Research the company or team behind the cryptocurrency
- Check their track record and reputation
- Look for any red flags or controversies
Understanding market trends and volatility
- Study the cryptocurrency market trends and historical price movements
- Monitor news and events that can affect the market
- Be prepared for the high volatility and fluctuations in the market
Evaluating the technology behind the cryptocurrency:
- Understand the technology and infrastructure behind the cryptocurrency
- Evaluate its scalability, security, and speed
- Assess the potential for real-world use cases and adoption
By conducting thorough research, investors can minimize their risks and make informed decisions when investing in cryptocurrencies. It is also important to remember that investing in cryptocurrencies can be risky, and it is important to only invest what you can afford to lose.
Which are Best Cryptocurrencies a New Investor should Invest in?
For me, initially, I would only stay invested in not more than 5 coins. Mentioned below are the cryptoassets I would be comfortable holding in the following percentage.
- Bitcoin (45 percent)
- Ethereum (25 percent)
- Polygon (10 percent)
- Binance (10 percent)
- Solana (5 percent)
- SAND (5 percent)
There is no fixed rule, though. You can invest in more number of coins and still make a good profit. If you are a beginner, I think it is better not to over diversify or try to be in all coins that go up. Remember, in a bull market, most of the coins go up. However, on a red day, these coins go down heavily. Now why I named BTC, ETH, MATCH, BNB, SOLANA and SAND. Let’s find out.
Investing in Bitcoin (45%)
Of all the coins you would be holding, Bitcoin is the best cryptocurrency with highest marketcap. It is not only a means of money transfer, but with Taproot upgrade, you can now hold JPEG, mp3 and mp4 within a Satoshi, in the form of NFTs. This has increased its usecase by a huge margin. Bitcoin DEFI is just getting started and could play a very handy role in the next bull cycle.
Thus, I think for anyone in 2023, investing 45% in Bitcoin cryptocurrency is a must,
Investing in Ethereum (25 percent)
Ethereum, popularly denoted by ETH, is one of the best layer 1 cryptocurrency that exists in 2023. I think in years to come, it will become very difficult for any other layer 1 blockchain to replace Ethereum by its marketcap. The truly decentralised smartcontract usecase is what it makes it different from any other layer 1s. I am so bullish on Ethereum that I think someday, ETH may cross BTC by its marketcap.
Hence, my recommendation is to keep atleast 25% of your crypto portfolio in Ethereum.
Investing in Polygon (10 percent)
Polygon is the best layer 2 blockchain solution. And I love investing in the best project be it any category. No other web 3.0 project has had reached the number of users or in other words seen the kind of adoption Polygon has seen lately. They have had a good number of web 2.0 brands that they partnered with. Sandeep Nainwal, one of the Polygon founders, want to make Polygon top 3 cryptocurrencies by impact.
This is why I recommend investing atleast 10% of your crypto portfolio in Polygon.
Investing in Binance (10 percent)
After the fall of FTX, Binance is the crypto exchange most of the crypto users use for trading. It is one of the highly liquid cryptocurrency exchange, with highest volume. Although there has been a lot of negative talking about Binance crypto exchange, I personally think of all exchanges, Binance is the most safest. CZ was first to publish proof of reserve and hence, if there is any cryptocurrency exchange that is set to benefit with the growth of crypto users and volume, it is going to be Binance.
As I already said, I like to invest in the best, investing 10% of your crypto portfolio in BNB is not a bad call.
Investing in Solana and Sand (5 Percent each)
Well, in terms of adoption, after Ethereum, if there is any layer 1 blockchain that gained massive support and love from the community, it is Solana. Solana NFTs are massively popular, after Ethereum NFTs. Because of the community, it is recommended to hold Solana in your long term crypto portfolio and invest not more than 5%.
Also, P2E and Metavrse is just getting started. After whenever there is another wave, cryptocurrency projects like SAND is going to get massively hyped, and thus, it is why you can invest in SAND token. My recommendation is restrict to 5% of your crypto portfolio.
Alright. Now that you know which 5 coins one investor must have in his portfolio, you may want to know: how to invest in them? Should you invest in one go, or should you follow some other strategy? I recommend DCA.
DCA is a MUST: What is DCA?
DCA is Dollar Cost Average. So when a coin falls, you should have funds to buy them at a lower price. For example, if you are buying Bitcoin at 22000 USD today, and the price drops to 15000 USD after one month, have funds to back your investment.
Let’s say you are buying 0.1 BTC at different intervals: You first bought at 22000 USD, and again at 12000 USD, you will now have 0.2 BTC for an average of 17000 USD.
Now again if it price drops to 7000 USD, and you buy another 0.1 BTC, you will now have BTC at an average buy of 14,000 USD.
BTC is volatile in nature. So are other crypto currencies.
In the last run, we had seen coins that were hyped like anything dropping more than 90 percent in value.
For example, AION was insanely hyped. It was a very good project. However, the coin dumped drastically from more than 10 USD to less than 0.25 USD. That’s 99.75 percent drop.
Even in this market cycle, we saw cryptocurrencies drop by 80-90% and even more.
Hence, DCA for all altcoins that are new is not recommended. You may keep buying and the price can still keep falling, and your portfolio will be in DEEP RED. I can give numerous such examples.
Best is to hold these 5 cryptocurrencies and keep Dollar Cost averaging. Remeber, you may need to keep repeating for atleast 4 years before you see your portfolio in green.
If you do not like taking such risk, best is to hold BTC and ETH and keep DCAing.
Benefits of DCA (Dollar Cost Average)
When you use DCA for investing in Bitcoin and other crypto coins, there are some good advantages:
- The fear of buying the top reduces, as you can drastically reduce your average buy price.
- You also do not need one time big investment. You can always invest in parts.
- You can use your time to understand Bitcoin’s behaviour.
- You can control your FOMO and fear of losing money.
If you want to learn about DCA, I recommend you reading this post.
Does that mean you should not buy any other altcoin?
Ofcourse, you may. However, I would advice you to gain some experience first.
If you are buying any altcoin, do it in very less quantity. Like 0.1-0.2 percent of your portfolio to begin with. Buy, make profit, sell in sats. Acquire more sats. Also, have strict STOP LOSS in place. Things can go rough in very short time.
Also, I would advise to keep checking Binance and whenever you see any reversal, invest and take small profits/losses. Avoid buying cryptocurrency that are already near its ATH.
What do Bharatafinance members suggest about which coins to invest in?
BITCOIN vs ALTCOINS: Behaviour Analogy
- Bitcoin goes up quickly, Altcoins in terms of SATS go down.
- Bitcoin drops quickly, Altcoins lose more in terms of SATS.
- Bitcoin goes sideway and stay almost stable, ALTCOINS go up => ALTSEASON
- BITCOIN go UP, and ALTCOINS go UP more in terms of SATS => MEGA BULLRUN (Rare)
Increasing SATS should be the END GOAL.
That’s all for the day. Do share your thoughts with us in the comment section.
Nice piece of information for newbies…