The global crypto marketcap can go as high as $10 trillion by 2025 and you’ll still not be rich if you’re holding the wrong coins.
You need to be correctly positioned to benefit as much as possible from the bull run, and that’s why your crypto portfolio is very important.
In this post, I will show you how to structure your crypto portfolio to both protect your capital and give you the maximum potential upside in a bull run.
What is a crypto portfolio?
Your crypto portfolio is the collection of all the crypto assets you own and hold with the expectation that their value will increase with time.
The goal is to build a well-structured, balanced, and risk-averse portfolio to mitigate risk and maximise your potential returns.
PS: If you’re investing in crypto purely for the tech or you’re strictly a trader, this article is not for you. I’m talking to long-term investors here.
Building a robust crypto portfolio
The crypto portfolio structure you choose to build will be based on your capital, investment goals and risk tolerance.
If you have a large capital, you can afford to include more crypto assets in your portfolio and vice versa.
So, below we will discuss different portfolio structures and what is required to maintain them. You can choose which one best fits your profile or take inspiration to design your own.
1. Bitcoin maxi crypto portfolio structure
This portfolio consists of only one coin —Bitcoin (BTC) and is mostly suitable for wealth investors who don’t need to take on too much risk.
The goal is to preserve their wealth or hedge against the increasing devaluation of fiat currencies by inflation while enjoying the upside in its price.
Bitcoin’s limited supply makes it less susceptible to inflation than fiat currencies and it has a proven track record of outperforming fiat currencies over the long term.
Also, Bitcoin is seen as a safe haven asset, as it’s less volatile than other cryptocurrencies. It’s also the most liquid cryptocurrency, making it easy for the rich to buy and sell without excessively impacting the rice.
The Bitcoin maxi portfolio structure is a good option for investors who want to minimise risk and who believe that Bitcoin is the future of finance.
Regardless of your capital size, you can choose to adopt the Bitcoin maxi portfolio but you will not have as much upside potential as a portfolio that includes other cryptocurrencies.
Also, Bitcoin’s price is not immune to volatility. Its price can fluctuate significantly in the short term.
Bitcoin maxi portfolio structure is a good option for crypto investors who want to minimise risk and do not mind settling for lesser gains.
The portfolio allocation here is 100% BTC.
2. Blue-chips crypto portfolio structure
Blue chips are crypto assets considered to have such an established ecosystem or network effect that it will take a cataclysmic event for them to become irrelevant or die.
They usually have large marketcap or liquidity, are widely traded, have an established track record, and are backed by a strong community of developers, users, or supporters.
The most popular blue chip coins are Bitcoin (BTC), Ethereum (ETH), BNB (BNB), Tether (USDT), USD Coin (USDC), and Dai (DAI).
But among the wider crypto community, only BTC and ETH are the real blue chips. So, for the purpose of this post, we’ll keep it to just BTC and ETH.
Portfolio allocation here is usually 50% to BTC and 50% to ETH. But, some people may choose to allocate disproportionately.
For example, it’s believed that ETH has greater upside potential than BTC in a bull run, but is equally more risky.
So, those who want to capture more potential upside will allocate more capital to ETH and those who lean more towards risk aversion will allocate more to BTC.
Most people who use this portfolio structure are usually average to rich investors with a stable income which they use to DCA into BTC and ETH on a regular basis.
For them, this is a superior savings account with the potential to significantly increase their wealth over 2 to 10 years.
3. Risk-averse crypto portfolio structure
A risk-averse crypto portfolio structure consists strictly of blue chips and stablecoins. That is BTC, ETH, and USDT/USDC/DAI.
For me, it’s usually BTC, ETH, and USDC. But USDT and DAI are equally great stablecoins.
However, I find myself using USDC more especially when providing liquidity on DEXs. But when trading on CEXs, I trade mainly against USDT.
By allocating capital only to these blue chips and stablecoins, risk-averse investors aim to reduce the overall volatility of their portfolio and make it more likely to withstand the infamous crypto market crashes.
Specific capital allocation here will vary for different people but I will allocate 30% to stablecoins, 40% to BTC, and 30% to ETH.
The ETH and stablecoins will be used to provide liquidity on a reputable DEX or farming airdrops if I can afford extra risk for a higher potential reward.
Otherwise, you can just keep the coins in your wallet and rebalance accordingly based on the market movement.
The Stablecoin is usually kept aside to buy those rare black swan BTC dips. Like the March 12, 2020, Bitcoin crash due to news of the Coronavirus. BTC price dropped by more than 50% in a single day.
But, when the price rebounds afterwards, you want to convert it back to stablecoins and continue to hold the original BTC and ETH allocations.
This portfolio structure is most suitable for investors with a few tens to hundreds of thousands to a million dollars to invest.
And like the blue-chips investors, some risk-averse crypto investors also regularly DCA into their existing position.
4. Liberal crypto portfolio structure
A liberal crypto portfolio structure would include blue chips, stablecoins, and other large to medium marketcap tokens with excellent fundamentals.
The liberal investor is willing to take more risks with crypto but never with shitcoins or microcap tokens that can easily rug or dump to zero.
The goal of a liberal crypto investor is to build up their wealth, and they’re willing to take more reasonable or calculated risks to achieve that.
This portfolio structure has exponential upside potential if you pick the right tokens but is equally riskier compared to the previous ones.
Capital allocation in a liberal crypto portfolio structure
Capital allocation here is more complex and depends mostly on the amount you have to deploy, your risk appetite, and the number of tokens involved.
With a high-risk appetite and more than 5 altcoins (excluding BTC, ETH, and USDC), I will allocate 10% to BTC, 10% to ETH, 10% to USDC, and 70% to the others.
The 70% will be spread among the altcoins so as not to overcomplicate my portfolio.
But if I want to lean towards lesser risk, I will allocate 25% to BTC, 25% to ETH, 25% to USDC, and 25% to the others. This is assuming I have $10,000 or more to deploy.
With a lesser capital and using the liberal portfolio structure, I will limit the total amount of coins to under 10 (BTC, ETH, USDC, + 5 others or less).
Then allocate 50% to 20% to BTC, 20% to ETH, and 10% to USDC. The rest 50% will be spread equally among the others.
You can be as creative and deliberate as you want with the allocations, taking into account your investment goals and the risk you can afford to take.
5. Degen crypto portfolio structure
The degen crypto portfolio structure will include everything above in addition to playing with shitcoins and new microcap tokens.
It’s perfectly fine if you want to do this and you fully understand the implications of dabbling into shitcoins, microcaps, and exploring trending narratives (e.g. SocialFi).
If I’m to structure my portfolio accordingly, I will allocate 10% to BTC, 10% to ETH, 10% to USDC, 50% to large to medium cap coins, and 20% to shitcoins and microcaps.
The specific allocation you use is up to you. This is just a template.
And this is assuming I have $10,000 or more to deploy, and I’m betting on crypto to make me rich.
You can take profit from your degen plays into your altcoins or blue chips but never the other way around. Otherwise, your portfolio will lose its structure and you’ll be riding blind.
Developing a solid portfolio structure that aligns with your crypto investment goals is important towards becoming a successful investor.
In this post, we have discussed the various crypto portfolio structures you can adopt based on capital outlay, risk tolerance, and investment goals.
Which is your favourite?