The cryptocurrency market remains one of the most volatile and unpredictable entities of its type, as assets continue to lose and regain value on a daily basis. The recent market has certainly encapsulated this, with Ripple claiming a 68% weekly gain following a period of sustained and heavy losses.
With this in mind, investors need to be fully prepared before entering the market for the first time and executing trades. Here are some of the key considerations to keep in mind.
1. Not All Cryptocurrencies Have Been Created Equal
If you’ve ever engaged in forex trading, you’ll know that not every single currency across the globe has been created equal.
The same can be said for cryptocurrencies, as each asset has its own unique profile and underlying risk level. This includes low, high and medium risk assets, with the latter offering a broad spectrum of options to investors and including the top 100 market cap coins.
To succeed in this market, you’ll, therefore, need to appraise the risk level of every token before building a balanced portfolio that can deliver sustained returns.
2. A Balanced Portfolio Is Also Required To Optimise Liquidity
On a similar note, a balanced cryptocurrency can also help you to overcome the lack of liquidity that constantly undermines the marketplace.
This was reflected by a recent report, which drew on data recorded at Coinmarketcap on June 18th. Despite the increased diversity of this market and the presence of more than 1,600 tokens, the majority of these were managed through the pairings of BTC, ETH, XRP, BCH, and LTC.
This highlights the fact that most crypto tokens boast relatively low demand and are difficult for investors to sell on or convert into cash.
To compensate for this, your portfolio should be balanced and make room for dominant cryptocurrencies such as Bitcoin. This asset accounts for 69% of the total trade volume recorded by the market, while it also plays an intrinsic role in defining the value of other currencies.
3. Some Crypto Assets Have More Intrinsic Value Than Others
While crypto assets and tokens have different values and risk levels, they also offer a diverse range of applications outside of the financial market in some instances. Assets like Ripple offer a relevant case in point, as this cryptocurrency underpins an innovative payment solution that is already being used by forward-thinking banks and financial institutions.
Because of this, Ripple arguably boasts greater intrinsic value than other cryptocurrencies, making it a superior choice for investors who want to pursue long-term gains. In this respect, Ripple may even offer a better option than Bitcoin in the longer-term, although this is definitely something for investors to observe in the future.
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