2. Focus on cryptocurrencies with different use cases
Cryptocurrencies have all kinds of uses, and these can be a good way to decide where you'll invest. Here are a few examples of crypto use cases:
- Store-of-value cryptocurrencies, such as Bitcoin (BTC -0.00%), are designed to hold value over time better than fiat currency. They typically have a limited maximum supply.
- Payment coins offer fast, low-cost payments anywhere in the world.
- Decentralized finance (DeFi) platforms provide blockchain alternatives to traditional financial services.
- Gaming coins power blockchain video games.
- Metaverse platforms have virtual worlds where users can explore and interact with one another.
- Privacy coins offer untraceable transactions.
There are a variety of cryptocurrencies that fit into these categories. You could build your portfolio by first picking out several use cases and then investing in one or two cryptocurrencies that fit each one.
3. Invest in smart contract blockchain networks
Some of the most successful crypto projects are blockchain networks that can run smart contracts. A smart contract is like a program that runs on a blockchain. There are all kinds of ways smart contract blockchains can be used, including launching decentralized apps (dApps) and new crypto tokens, so this is a competitive space.
Since each blockchain has its own advantages and disadvantages, some investors spread their money around to several of them. Here are the cryptocurrencies for a few of the biggest smart contract blockchains:
4. Divide your portfolio into Bitcoin, Ethereum, and everything else
Although there's no such thing as a safe cryptocurrency investment, Bitcoin and Ethereum come the closest. Bitcoin is the largest cryptocurrency, and since Ethereum's launch, it has usually been second. Because they're the mainstays at the top of the market, they're more likely to stick around for the long haul.
If you want to weight your portfolio toward lower-risk cryptocurrencies, you could prioritize Bitcoin and Ethereum. For example, you could use one-third of your crypto funds to buy Bitcoin, one-third to buy Ethereum, and the remaining third to buy any other cryptocurrencies that catch your eye.
5. Check out cryptocurrency stocks
Cryptocurrencies aren't the only crypto investment option. You can also invest in cryptocurrency stocks, which are companies related to crypto and blockchain technology. Since these companies provide a different type of exposure to crypto than investing in cryptocurrencies themselves, they're great for a diversified crypto portfolio.
