Despite what some people might say, 2021 is still a good year to start investing in cryptocurrencies. In this article, I will describe how to build your crypto portfolio, then I will go through some of the best cryptocurrencies to invest in for the long term.
Usual word of advice: try to not rush in without a plan and don’t invest all your life savings. Also, keeping in mind the basic principles of crypto investing should offer you a good start (do your own research, never invest more than you can afford to lose, always secure your private keys).
When starting out with crypto investing, one of the first things you should do before actually buying anything is to make a list.
This list should contain which cryptocurrencies will go into your portfolio and in what percentage.
This is the most important phase of long-term crypto investing. Based on this initial research, you can distribute your investment capital in a balanced and manageable way.
How to build your crypto portfolio
Let’s say you have X amount of capital you want to invest in crypto by next year. Because you’ve learned something about investing, you know that it is wiser to use a dollar-cost averaging strategy instead of going all-in.
In case you don’t know yet how dollar-cost averaging strategies can be used in crypto, check out my previous guide on this topic.
As mentioned, the next step is to do the actual research. Take some time to learn about as many crypto projects as you can. See what they do and in what stage of development they are. Check how you could benefit from investing in a certain project and where would the returns come from.
Are these expected returns from staking rewards, increase in price, both? Write all that down.
Also, very important to find out how secure is the project, if it passed an audit or not, and what is the general reputation of that coin/token.
More important, what is your gut feeling about it. You can actually get a good hint about a project based on the first impression you have when checking out their website.
Also, remember to check the tokenomics on Coinmarketcap – what is the circulating and total supply of the coin.
Once you have gathered all that information, put every cryptocurrency you find appealing into a spreadsheet. Then filter through them until you are left with a low enough number – I would go with a max 10.
Again, take your time to make each selection. These will be the cryptos that will make up your investment portfolio for the next few years.
The next step is determining which percentage or weight each coin in your spreadsheet should have in your crypto portfolio. In another column, right to each coin, write down a percentage of how much that coin should represent from your entire portfolio.
For example, you want your portfolio to contain at least 30% worth of BTC, 25% ETH, and so on. In the end, make sure the percentages amount to a total of 100.
So far so good.
Next, you want to determine how much of your total capital will go into each coin, based on the percentages you set. You should end up with something like this:
Finally, now that you have your portfolio template, it is time time to start looking at the prices.
Is there a significant dip in price for certain coin in you list now? If so, consider adding some to your balance. If the price is not at the lowest, consider dollar-cost averaging. Maybe buy at the end of each month, or maybe set some price alerts for when there is a big dip in price. It’s totally up to you to customize your entry strategy.
After each new purchase, remember to log it into a cryptocurrency tracker, like Cointracking.info. This way, your crypto investments will be much easier to track over time and you will also get easy to manage tax reports.
My selection of 10 best cryptocurrencies for 2021
If I were to start from scratch this year with crypto investing, these would be the projects I would consider selecting for my portfolio:
BTC – 20%
Bitcoin is still the king. As long as that does not change, I would want to have at least 20% in BTC at all times. Simply hold it in a cold storage wallet like Ledger, not staking it, not held on an exchange for rewards, not locked in any crypto loans app. Expected returns are from rising in price, in a minimum 10-year window.
ETH – 20%
Ethereum deserves the same portfolio weight as Bitcoin, especially with the upgrade to 2.0 and the opportunities that it could bring. Ethereum has even more growth potential than Bitcoin (at least this is how I see it). Also, since staking is available, with min. 5% returns per year, the initial investment can be compounded over time.
ALGO – 15%
Agorand is one of my favorite crypto projects. I see them as one of the best blockchain projects in terms of progress, tokenomics, opportunities, security, and innovation. They also have 7% yearly returns for staking, which is nice.
COMP – 10%
Compound has excellent tokenomics, with only 10 million tokens in total, was one of the first tokens available for staking, and is currently the most used dapp. Very solid project.
ATOM – 10%
Cosmos is a big competitor for ETH, focused on scalability and blockchain interoperability. They currently have staking returns of 9.7% per year, one of the best rates on the list. In the long term, they have a lot of room to grow, and I see them rising up to the expectations.
XMR – 5%
Monero is the reference coin when it comes to privacy. I see it as the faster, more private version of BTC. It is a strong bet that XMR will be around in 10-20 years, at a much higher price than today.
BNB – 5%
Binance token has to be on the list, simply because they have good return rates. Also, the total supply will be lower over time due to token burns, and I believe they will be around for a long time.
EGLD – 5%
Elrond has one of the coolest wallets I’ve seen so far (Maiar), excellent tokenomics, with around 22 million coins in circulation out of a total of 31 million and one of the best staking returns, currently set at around 15-19%. Huge potential for growth as well.
ADA – 5%
Cardano is another great potential investment, focused on scalability and security. They are still in progress with the project, but once complete, they could be a real challenger for Ethereum. Tokenomics are not that great in my view, but with 5% APY for staking, they are still worth the risks.
ICX – 5%
Icon is a fast and reliable interoperability blockchain. The current price, project longevity and the fact that they offer 10% on staking yearly returns make ICX a must-own.
As a final word, no matter what you add to your cryptocurrency investment portfolio, do your best to secure your holdings. Following a few basic rules should be a good start. Use cold storage wallets if possible (otherwise, make sure you use wallets downloaded from official websites), hold your private keys offline or on an encrypted drive, never share your private keys with anyone, make frequent wallet backups.
Cryptocurrency investments are still in an incipient phase. Looking into the future, the risk/reward ratio for investing is, for me at least, greater than the risk/regret ratio.