How to Build a Great Crypto Portfolio 

Learning to build a great crypto portfolio is the final step in putting it all together and achieving success. However, if you take the wrong approach, you can quickly run into trouble. Too aggressive and you are basically signing up to get rekt! Too conservative and you will probably underperform the wider market. The trick is to find a balance where you can reduce your overall risk while maximizing your gains. And while there is no “perfect” portfolio out there, there are some approaches that will be more likely to put you on the winning side of the equation. 

I am, by the way, speaking strictly from the crypto context. Your crypto portfolio might only make up 5, 10, or 25% of your broader investment portfolio. Remember, crypto is risky and is not the only game in town. 

These are ingredients for your portfolio: 

• Blue Chips: These are basically Bitcoin and Ethereum. Although arguments could be made for a few other coins to fit into this category like BNB, Monero, and maybe even Dogecoin. These are coins that have strong network effects and have proven their staying power in the market. 
• Stablecoins: These dollar-backed (sometimes other currencies) coins are an essential part of a crypto portfolio. They allow you to lock in gains, preserve capital, buy dips, and participate in defi farming.  
• Big Caps: These are the coins that have growing network effects, and growing levels of adoption, but are still pretty new to the market. Usually, we think of big caps as coins that are not blue chips but are still in the top 20 or perhaps top 30 by market cap. 
• Mid Caps: These are coins that I often find can be in the sweet spot for investors. Often they are early in their growth stage and are showing promise. These coins range from around the top 30 down to around the 50 to 100 million dollar market cap range. A lot of solid coins with good teams, good tokenomics, and good backers can be found here. These are coins that can give some really solid gains in a bull run. 
• Low Cap Degen Moonshots: Without a doubt the riskiest category of coins. These are coins with under 50 million dollar market caps, with the real sweet money makers being under 10 million dollar market caps. The risk here is usually very high. Some coins in this level may just be building still and the market hasn’t caught on yet, others are just zombies.
• NFTs: Altcoins with pictures. I do like NFTs, but they are probably at the most extreme end of the risk parameters for the crypto market. They lack liquidity, they often lack utility, and they often over promise and under deliver. Still, though there is money to be made here if you have the time and energy for it. 

*** Do note that altcoins whether big, mid, or small cap generally break down further into categories like blockchains, defi, oracles, gaming, etc. 

Common Portfolio Frameworks

1. Blue Chip Only

This is the easiest and lowest risk crypto portfolio. Buy 50% Bitcoin and 50% Ethereum and then just chill. Owning these two coins will give you broad exposure to the crypto industry while keeping risk low. But such a portfolio will also give you the least gains potential. Sure, it still beats the heck out of the S&P 500, but it doesn’t come close to altcoin gains potential! 

2. Mid Risk – Mid Gains

This is a portfolio that is ready to take on a bit of risk, but also not willing to gamble. The focus here is on established players from the big and mid cap areas while still keeping a foot in the low risk blue chips. 

• 10% Bitcoin, 10% Ethereum, and 10% stablecoins as a base. 
• 30% into big caps for example 10% Cardano, 10% Polygon, and 10% into Avalanche. These coins all are much more established players while also offering bigger gains than BTC and ETH. 
• 40% into some nice mid caps. These are the ones that are likely to bring the biggest gains in your portfolio, although we do start to introduce more risk here. We can also start to branch out into different categories of coins here. For example: 
  • The Sandbox 10% for exposure to the metaverse.
  • Aave 10% for exposure to decentralized finance. 
  • GMX 10% for exposure to perpetual swaps markets. 
  • Axie Infinity for exposure to the gaming world. 

*** to be clear I am not saying to run out and buy exactly those coins, this is just an example. 

3. Barbell Strategy

This is a portfolio that goes for 50% safe assets and then 50% risky assets. So your portfolio might look something like 

• 25% Bitcoin, 15% Ethereum, and 10% stablecoins for your “safe” portion. 
• Then for your risk portion, we skip right over big and mid caps and go into low caps. Maybe 5% of your portfolio into each of ten different coins. 
• Continually rebalance and move profits into BTC, ETH, and stablecoins. 

4. Yolo

This, like the name implies, is focused on high risk “make it” bets, while not going full degenerate gambler. There will be no Bitcoin and Ethereum here. No big caps either. I do not recommend such a portfolio, but I provide it to give you some food for thought. 

• 50% Mid caps – a strong base of coins that have good potential for success and gains combined while not being as risky as some of the other coins in the portfolio. No single investment should be more than 10% of your portfolio. 
• 40% Low caps – This is where this portfolio makes the big money or loses it all. There are many low cap gems that will 50 or 100X, the only trick is finding them. No single investment should be more than 5% of your portfolio. 
• 10% NFTs – the edge of risk and also a potential area for hitting some nice gains. Buyer beware! 

5. Ecosystem Bet

This is a portfolio that focuses on just one blockchain. Obviously, the risk here is having all of your eggs in one basket should the blockchain fail, then everything goes down with it! Let’s take Ethereum as our example. 

• 30% Ethereum – this is the cornerstone of the portfolio. It will of course be staked for extra yield. 
• 10% stablecoins – these will be used in defi for farming coins or just earning more yield on an app like Yearn Finance or Curve Finance. 
• 60% Ethereum based mid cap coins – this would focus on more established players across the Ethereum ecosystem which have the potential for both good gains and staying power. 
  • 20% in defi protocols like Aave and Curve finance which will be staked to generate extra yield. 
  • 20% in gaming coins like Enjin and The Sandbox. 
  • 20% in miscellaneous coins like layer two Ethereum protocol Optimism and launchpad token Dao Maker. 

*** Again, to be clear I am not saying to run out and buy exactly those coins, this is just an example. 

While all of the above is great, from a theoretical perspective, the reality of your portfolio will inevitably be something of a mixed bag. A little of this, and a little of that. But, having a guiding principle for where you want your portfolio to be can really help keep you on track to success. 

Remember too that your portfolio strategy may change depending on the broader market conditions. In a bear market stablecoins and blue chips are king, and in a bull market low cap and mid cap coins are the way to make money. Also, keep in mind that your portfolio must be managed, which means rebalancing when one or a few low cap altcoins are suddenly the majority of your portfolio or even crazier the majority of your total wealth. Take profits, rebalance, and keep seeking success. 

The Biggest Mistakes for Portfolio Construction

Having Too Damn Many Coins!

I know how it goes, every new coin you read about is the new paradigm of money, and you must own it. Before you know it you have 50 coins in your portfolio and it is now impossible to manage. You have 10 wallets. You forget to stake half of them. You miss pumps and profit taking opportunities. You need to keep up with your investments, and it just becomes next to impossible if you have too many coins. This portfolio is likely to underperform and be overly risky. 

Being Too Patient or Aggressive 

Being too impatient and too aggressive will also bring in more risk than most investors are really ready to handle. Did you ever hear about the guy who bought $8,000 of Shiba Inu and turned it into 6 billion within a year? Yeah, it happened, and guess what, you are not that guy. But you think that if you ape into every low cap you find that you will be that guy… yeah, the odds are not in your favour! For 99.99% of investors, patience is key to success. 

Not Using Your Assets

Not using your assets to their full potential. If you can stake a coin then it had better damn well be staked. If not then you are losing out on free money. The crazy thing is that many investors don’t stake their coins! Doing this is essential to portfolio management and success.