While the end of 2021 was devoid of the impressive gains made during the months before Q4 of the year, the underlying user statistics and metrics suggest considerable growth. According to reports from PitchBook, the global median valuation of the crypto market experienced a record-breaking rise from $12 million in 2020 to a whopping $35 million in 2021, a 200% increase from the previous year.
With these statistics suggesting an exponential growth of the crypto market, interest in this new technology has surged, breaking the existing information barrier and offering prospective investors an opportunity to gain from the booming market. Developing a sustainable framework to evaluate potential trades, core values propositions, and market opportunities are a few of the paramount factors to take into consideration when delving into the market this year.
Acquaint yourself with the volatile market and learn about the emerging and potential-laden currencies within varying market sectors. With an idea of the market, you need to narrow down your crypto prospects by researching to see if the project has a suitable white paper, a viable roadmap, and tokenomics. This will give you insight into the unique value proposition of any project.
Before investing in any project, there are a plethora of questions you will need to answer—
- How deep did you dig to discover this crypto project?
- Is it based on sound and sustainable tokenomics?
- How much do early investors hold in relation to the overall token supply?
- Who are the team members, do they excite you?
- Is there a strong community behind this project?
- Are the goals penned down in the project white paper feasible in the allocated time?
Given the unregulated, delicate nature of the trillion-dollar crypto space coupled with the common price fluctuations synonymous with the market, it is important to stay on top of the game through constant research absent all kinds of emotional attachment.
Diversifying Crypto Investments
Diversification helps to mitigate risk through strategic exposure to markets with underlying potential. In essence, your crypto investments should be spread across blue-chip and non-blue chip shares. If, for example, your portfolio consists solely of Bitcoin and Ethereum, then it is a poor crypto portfolio.
With the crypto market evolving into different unique trends like NFTs, DeFi, GameFi, Utility tokens, and the recent Metaverse, spreading your investments across these trends may well be your best strategy to building a sustainable and long-term crypto portfolio in 2022.
Carefully evaluating your investments would require you to provide answers to these pertinent questions;
- Are these tokens well established in their infancy?
- Are these tokens disruptive or merely alternatives to existing projects?
- Do these tokens have similar risk values?
Assess Risk Factors
While conducting high-level research and diversifying your investments across multiple projects are important to building a winning crypto portfolio in 2022, assessing the risk level and outlook of a potential project is pretty important as well.
Albeit a difficult task to accomplish, an in-depth overview of a project’s market capitalization is the foremost indicator in your foray into the world of assessing risk factors. The consensus on the crypto market is that the larger the market cap, the fewer risks it may pose. Additionally, tokens with insignificant market caps, although offering the greatest return on investment, may be riskier and highly volatile.
Owing to the transitory nature of the crypto market, the best practices are yet to be unraveled, however, this piece has shared fundamental insights that will help you build a long-term, profitable, and winning crypto portfolio in 2022.
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