How to build a long term crypto portfolio: What you need to know

Since November 2017, when I dealt with cryptocurrencies for the first time, I've experienced several bear markets and made every rookie mistake possible when it comes to investing in cryptocurrencies. I hope to share what I've learned about long-term cryptocurrency investing with others, both fresh newcomers and seasoned veterans. In this post I will explain how to build a crypto portfolio with a long-term focus.

For whom is this post?

• If you're looking to make a long-term investment in cryptocurrency and believe it has potential beyond just speculation
• Seeking ideas on how to build a crypto portfolio

Build a strong foundation

We are here for the long haul; investing is a marathon, not a sprint. Before you even think of touching nfts, defi, dapps, etc., we need to build a strong foundation. Our first goal in crypto should be to build a solid crypto portfolio foundation. This will help you survive the bear markets and come back stronger in the bull markets. We want a strategy for long-term investment, and these three points have been proven and battle tested repeatedly:

• Use a reputable and secure crypto exchange (e.g. Binance, Coinbase or Kraken)
• Monthly DCA
• Don't put all your eggs in one basket; invest in high quality cryptocurrency projects

I will explain each point in the sections that follow.

Reputable and Secure Exchange

It is extremely important to use a reliable and safe cryptocurrency exchange. Several large exchanges have been hacked, gone bankrupt, or rug pulled their users' money in the past. It is pointless to be a millionaire on paper if your broker has been hacked and you cannot access your assets. I would recommend you use one of the three major exchanges: Binance, Coinbase, or Kraken. These are well-known in the crypto community and are regarded as safe and secure for beginners. After you've created your account, always add 2FA (with Google Authenticator) to your login. If you haven't already, you can sign up for Binance through my affiliate link. It will support my blog and save you up to 10% on trading fees:

 

Binance Sign Up Affiliate Link

Monthly DCA

A common investment strategy is monthly dollar cost averaging (DCA). You invest on a monthly basis, regardless of market conditions. Its purpose is to decrease and manage risk at the beginning. Cryptocurrencies are incredibly volatile, and many investors are emotionally unable to bear the ride. DCA will lessen the volatility of your portfolio at the beginning - after few years, when you have a large amount of crypto, you will feel those volatile swings more heavily, but you will have the experience to emotionally handle it. Furthermore, many people do not have a lot of money to begin with to invest. By investing consistently and on a monthly basis, you will build a sizable portfolio over time.

How much to DCA?

Only you or your financial advisor should be able to respond to this since it is a private matter. I only DCA or invest into crypto what I can afford to lose.  Especially during crypto bear markets, this will lessen the emotional and psychological strain. Let me warn you that DCA during these periods of severe crypto bear markets is extremely difficult. By setting a DCA budget, I could manage my emotions and stay true to my DCA plan.

Which coins should I DCA in?

This one is a tough question. To be clear, I am not a financial advisor, and the following is my own opinion. I also have no idea which cryptocurrency will be the next great hit like Google or Amazon. However, I think that the entire crypto industry has a bright future and that it will grow tremendously. Therefore we shouldn't invest in a single crypto project - like you wouldn't invest in one stock. You want to build a portfolio which can endure several years and is invested in the broader market. Picking and researching the right crypto is a science in itself, and newcomers would be completely overwhelmed. I will write about this part in more detail in a separate article. Here I just go briefly over how I manage my portfolio. I utilize the website quantintegral.com to build my long-term portfolio. They have many crypto indexes that measure the market's development. For my portfolio, I prefer the QI Crypto Tech Index. According to Quant Integral, it consists of 7 cryptocurrencies with the most promising use cases or innovations. I research their index and DCA into these 7 projects each month. When the cryptocurrencies in the index changes I sell the coins which got kicked out and redistribute the money to the other cryptocurrencies. You may track the progress in my live experiment blog posts.

Conclusion

Building a solid portfolio should be the main focus of any investor. Investing is a marathon, not a sprint. Therefore, our investing approach must be long-term oriented. Using monthly DCA and investing in multiple solid crypto projects can reduce risk and allow investors to create a substantial crypto portfolio over time.

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