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As crypto markets evolve faster than we can keep up, people need more advanced strategies, technologies, and tools to navigate this brave new world. Disruptive technologies restructure how we live and work, and crypto markets are prime examples of that.
Cryptoassets are unlike any investment class we've ever seen before, but as is with any investment, proper management and control are crucial to success. As such, every investor must have a strategy to maximize returns, minimize losses, and manage risk.
Portfolio management is how investors choose and position their investments to optimize returns over time while managing risk. Portfolio management involves analyzing an investor's current financial situation, setting investment goals, and constructing a portfolio that works to achieve those objectives.
There are many different approaches to portfolio management, but the two most common are active and passive management.
Active portfolio management is a more hands-on approach that involves frequently buying and selling assets to beat the market.
Passive portfolio management is a more buy-and-hold strategy that involves holding a diversified mix of holdings while making occasional rebalances to keep the portfolio in line with the investor's goals.
A crypto portfolio functions the same as any traditional portfolio, with two key differences:
Volatility: Cryptoassets are notoriously volatile. Since Bitcoin's inception in 2009, we've seen highly volatile bull and bear markets. In bull markets, which historically coincide with Bitcoin halving cycles, prices increase hundreds — sometimes even thousands — of percent.
However, in bear markets, prices can fall just as dramatically. These aren't 5, 10, or even 20 percent swings; these are gut-wrenching drops exceeding 80 percent.
In other words, the price of cryptoassets can (and do) change rapidly and frequently. For the average person, it's tough to keep up — let alone make sound investment decisions. Managing highly volatile assets is tricky and requires much expertise, knowledge, and vigilance.
Ownership: Unlike traditional assets regulated by central authorities, cryptoassets are decentralized and not subject to government control. This lack of regulation and decentralization is one of the main reasons for their popularity. But it's also a double-edged sword, opening the door to fraud, scams, and hacking.
The topic of control is also known as "custodianship," and it's an integral part of portfolio management. While the original ethos stressed the importance of "being your own bank," many investors have realized that it's simply not realistic or safe to try to manage everything themselves.
Instead, many investors have realized that entrusting their assets to custodians — an exchange, a wallet provider, or a specialized service — is the best way to keep their crypto safe. Ultimately, this decision comes down to each investor and their comfort level with managing their assets.
Whether you've been in the crypto space for years or just getting started, one thing is clear: strategy is essential to long-term success. Most people intuitively know that strategy is important, but many have difficulties defining, designing, and executing it.
So how do I choose a plan for my investments? How do I know if it's working? What are the best strategies for different types of assets?
Although this sounds like a complicated and daunting task, there are some clear-cut questions you should start with:
The first step is establishing what you want to achieve with your investments. For example, do you want to grow your wealth? Protect it from inflation? Or both? Once you know your goals, you can start targeting suitable types of assets.
Are you investing for the short term or the long term? This will have a significant impact on what types of assets you choose. While there are thousands of cryptoassets, only a few hold "blue-chip" status, a term that describes dependable assets that are expected to hold their value or increase in value over a long period, Bitcoin and Ethereum being two prime examples. Others are much more speculative but potentially have much higher returns in the short term.
As the adage goes: Never invest more than you're willing to lose. The same is true for crypto. It's essential to clearly understand how much you're eager to invest in this asset class and to stick to that number. Investing more than you're comfortable with can lead to anxiety, poor decision-making, and, in extreme cases, devastating loss of capital. Understanding your risk tolerance ensures you're investing an amount that won't keep you up at night.
Active Management: This is the traditional approach to portfolio management, where the investor actively buys and sells assets to beat the market. This can be time-consuming and challenging, requiring constant vigilance and research. Many people don't have the time or knowledge to do this effectively, but if you do, it can be a rewarding strategy.
Passive Management: A much more straightforward approach where the investor buys and holds assets for the long term. This is a much less time-intensive strategy, but it doesn't always allow for the same potential upside as active management.
Hybrid Management: A mix of the two previous approaches, where the investor actively manages some portion of their portfolio while passively holding the rest. This can be a good compromise for those who want to take an active role in their investments but don't have the time or energy to commit fully to them.
No matter your chosen strategy, there are a few key things to remember when managing your crypto portfolio.
Diversification: One of the most essential concepts in investing, diversification is key to mitigating risk. By spreading your investments across different assets, you can protect yourself from sudden swings in the market.
Rebalancing: As your investments grow and change over time, it's important to periodically rebalance your portfolio to ensure that you're still aligned with your goals.
Taxes: Crypto assets are subject to capital gains taxes, so keeping track of your profits and losses is essential.
Making mistakes is an inevitable part of the learning process, and when it comes to crypto portfolio management, new investors often make a few common blunders.
Here are three of the most common mistakes and how to avoid them.
Not Learning About Dollar-Cost Averaging (DCA): DCA is an investing strategy that involves buying a fixed dollar amount of an asset at regular intervals, regardless of the price, allowing you to average out the cost of your investments over time and avoid buying at highs (or selling at lows). Many people don't use this strategy when buying crypto, instead opting to buy when they believe the price is low. However, this often leads to buying at a poor time and can result in losses. Dollar-cost averaging may not be the most exciting way to invest, but it can help you avoid making costly mistakes.
Not Tracking Your Investments: Failing to track your investments is a recipe for disaster. You need to know what you own, how much it's worth, and how it's performing if you want to be successful. There are several ways to track your investments, from simple spreadsheets to more complex portfolio tracking tools.
Forgetting Your Exit Strategy: One of the most important things to remember when investing is to have an exit strategy. Bull markets and their colossal returns can entice even the most risk-averse investors to stay in for too long, only to see their profits evaporate when the market turns. By having a plan and sticking to it, you can prepare for the inevitable market corrections and minimize your losses.
There's no shortage of portfolio management software on the market, but not all of them are created equal.
When choosing a portfolio management software for your crypto investments, it's essential to consider these four factors:
Ease of use
Price
Supported assets
Portfolio tracking features
As the first mobile crypto app that allows anyone with just $10 to get started, Ember Fund is perfect for those new to the space and looking for a simple investment. Ember Fund boasts a beautifully simple UI, but it's not just simple; it's also affordable, professional, and offers the most intelligently designed portfolios. While Ember Fund doesn't include every crypto asset, this is for a good reason — they only include the best of the best.
Ember Fund offers hybrid management, which means you can track and manage your portfolio, or if you want to set it and forget it, you can let the experts manage it. And while the fees vary by portfolio, they're never monthly flat fees, so you're only ever paying for your gains. Ember Fund also gamifies the experience, rewarding users with Bitcoin every time they complete tasks and learn about the space.
CoinMarketCap is one of the most popular sites in the crypto space, and for a good reason. It offers a ton of helpful information, including prices, market cap, and volume for almost every cryptocurrency. As a free app with virtually any crypto asset listed, it's an excellent option for those on a budget. However, it's only a tracker, not a portfolio manager, so you won't be able to manage your investments from within the app.
In addition, the site also has a handy portfolio tracker that allows you to see how your investments are doing. Simply enter the amount of each asset you own, and the tracker will show you your unrealized and realized gains and losses, as well as your overall portfolio value, to give you a better idea of how your investments are performing.
CoinTracking can collate data from your exchanges and wallets and put it all in one place, providing you with a comprehensive picture of your portfolio. Additionally, CoinTracking can also help you with your taxes by generating a report of all your realized and unrealized gains and losses.
CoinTracking boasts over 13 years of data from over 20,000 crypto assets, making it one of the most comprehensive tracking tools on the market. As a result, CoinTracking is an excellent tool for those who want to keep track of their investments and stay on top of their taxes. In addition, CoinTracking offers a free plan for those who make under 200 transactions a year, and paid plans range from $130-$659 per year.
Shrimpy is a portfolio management tool with several features that make it perfect for those who want to take a hands-on approach. With Shrimpy, you can connect various wallets and exchange accounts, dollar-cost averages, and automate your portfolio rebalancing. Shrimpy also has a social element, allowing you to follow other users and see what strategies are working for them.
However, Shrimpy comes with a price tag, charging high monthly fees regardless of portfolio size. And for most investors, Shrimpy's features are unnecessarily complex, as most people only need the essential portfolio tracking and management features.
When considering ease of use, price, supported assets, and portfolio tracking features, Ember Fund is the best crypto portfolio management app.
Bringing crypto assets to the masses requires optimizing the trust, education, and distribution of resources to make this happen. The internet never reached critical mass until it was accessible and easy to use for everyone, not just early adopters and tech-savvy users. The same is true for crypto.
Ember Fund emulates this approach by beautifully balancing design with utility.
If you're looking for an all-in-one solution that is both easy to use and packed with features, Ember Fund is your best option. Download the Ember Fund App here and start managing your crypto portfolio the right way.
Sources:
What Is Bitcoin Halving | Forbes Advisor
A brief history of Bitcoin crashes and bear markets: 2009–2022 | Coin Telegraph
Dollar-Cost Averaging (DCA) Explained With Examples and Considerations | Investopedia
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